Written by Skenderbeg Alternative Investments

Put into perspective”– the monthly newsletter of Skenderbeg Alternative Investments AG – is an informative, thought-provoking, and entertaining tour around the financial world.

“Interest rates are prices, and the prices convey information. Price control distorts and manipulates and distorts and confounds the natural order of things, and you get unintended and adverse consequences.” – James Grant

Hedge Funds

Why we’re in a “new era” for L/S and market neutral funds

We are entering a new era for long/short and market neutral funds as traditional markets come under pressure, Silver Time Partners’ Romain Stephan has said. “What’s new in the equity space in Europe is that central banks are tightening monetary policies and we are seeing much more dispersion in the equity space,” he told Citywire Selector.

Stephan said since September companies disappointed markets creating a large drawdown.

“This hasn’t been the case for the last five years,” he said. “Every time there has been bad news from the market, central banks have come in and said: “Okay it’s fine, we are here”. This is over, and we have been witnessing a lot of drawdowns. For example, in the UK we have had companies like Centrica which is down 33%, after very poor numbers and we also have Dixon Carphone, which is down 45%, there is a lot of alpha generation we are now able to do on the short side.

The QE quandary

The most challenging thing at the moment, Stephan said, is the central banks quantitative easing. “It’s been very difficult to position in the long-term books and avoid bad companies. With the QE program, the bad companies were really supported by central banks. There is the possibility of a drawdown in the US market which would cause all markets to drop. What we see is that we are coming out of a decade of central bank activism. We are coming back to a time when no central banks are interfering in the market, so for stock pickers in L/S strategies it’s a very exciting time.”