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FX debate: Testing times in the search for alpha

According to press reports, Polygon Investment Partners, an $8 billion UK hedge fund, is changing its redemption system in a bid to slow investor withdrawals. The fund, which had lost 4% by the end of March, operates a first-come, first-served redemption system that limits the amount of withdrawals at any particular time. But management reportedly claims that this has resulted in investors applying to withdraw money in a bid to be first out of the gate, simply to avoid being caught last if the fund were to get into serious trouble.

"The problem is that banks have ended up lending to these deals by accident – they thought that they were underwriting them"

With the euro hitting fresh record highs against the dollar, it must be tempting for European policymakers to crow. However, complacency could lead to crisis.

The grip of the credit crunch seems to be easing for Brazilian corporates wanting to issue debt. This optimism from Brazil is in line with the rest of Latin America, where the debt market fog is clearing.

A reduction in foreign capital flows means that many banks in eastern Europe are indirect victims of the credit crunch.