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Maturity of bond market will be tested as issuance builds.

Despite negative returns in 2008, hedge funds should bottom out this year and look attractive to many investors compared with other asset classes. Neil Wilson reports on the latest data.

The ECB could take an unprecedented step tomorrow – and start to buy private debt. But opinion is sharply divided as to whether such quantitative easing will work.

The combination of network and trading infrastructure issues that resulted in Icap’s EBS platform crashing twice in early March inevitably got tongues wagging. Icap responded quickly and took EBS down mid-week for maintenance. Its decision looks well founded. Just a week later, a record level of activity took place in dollar/Swiss franc trading following the Swiss National Bank’s dramatic change in its monetary policy. And as Icap was also swift to point out, far from being "creaky", EBS has chugged along without any trading interruptions since August 2005.

An analyst report from Morgan Stanley predicts a further 15% to 30% redemption in hedge fund assets over 2009. About 20% of assets have already been redeemed. If the predictions are correct, the hedge fund industry will have shrunk to $950 billion by the end of the year from an estimated high of $2 trillion.

The Universities Superannuation Scheme, with more than £23 billion in assets, is increasing its allocation to alternatives from 10% to 20% over the medium term. At present the fund’s alternatives portfolio primarily makes private equity and infrastructure investments but hedge funds will be a focus of the increased allocation. Emil Porter of Key Asset Management has been hired to head the initiative. Mike Powell, who heads alternative assets at USS, says there are more hires to come.

Research from fund of hedge funds Infiniti Capital says managers that have been running their funds for less than three years are outperforming older and larger managers. Infiniti’s emerging manager products lost 12% in 2008 compared with about 18% for average hedge funds. One reason, suggests Infiniti, is that larger well-established hedge funds have stickier clients, who are less hasty in their redemptions. As such, managers would have been later in recognizing the panic selling by investors.

Adrian Walkling has quit UBS, where he was co-head of FICC Distribution, EMEA. He is believed to be headed for a senior sales role at Standard Chartered in Singapore.

Sanford Bernstein analyst Bradley Hintz says that as hedge funds change the way they do business with prime brokers, the top players will change. Hedge funds will no longer accept big counterparty exposure, he argues. He predicts that the top three prime brokers in 2012 will be JPMorgan, followed by Goldman Sachs and then UBS.

Those that avoided Madoff madness surely offer a wiser approach to investment than some investors’ rash direct investments. Neil Wilson reports.

At this month’s G20 summit, international regulation of financial services firms is certain to be the dominant debate. However, there are growing doubts that more rules will benefit the hedge fund industry.