Hedge funds wary of punts on North African chaos

By Sinead Cruise and Laurence Fletcher

LONDON | Fri Feb 25, 2011 1:48am EST

LONDON (Reuters) - Hedge funds are so far shying away from the
political turmoil in North Africa, despite their reputation as
risk-takers on the lookout for a instant gain.

Only a handful are starting to hunt ways to profit with investments,
for example, in oil and credit protection.

"It's a modest like the financial crisis in 2008. Many managers are
adage, 'how am I supposed to figure this one out?'", said Morten
Spenner, who heads hedge fund of fund manager International Asset

"If (Libya's) Gaddafi said tomorrow, 'Look, we've sorted it all out',
oil prices could fall as much as 5 or 6 dollars a barrel in a day.
And you could be really terribly hurt."

A sudden burst of anti-government gripe in Tunisia last month has
sparked violent uprisings in Egypt and oil-rich Libya, paralysing
economies and threatening asset values across the North African
region and further than.

Macro hedge funds normally like to take bets on which country or
company might suffer most or bounce back fastest from a debt crisis
or a depression, but are wary of trying to following-guess
governments or politically charged situations.

Most are now playing a waiting game until they have a better feel for
how political tension could harm financial markets or the credit
ratings of countries and companies across the region.

After losing 19 percent in 2008's market turmoil, according to Hedge
Fund Research, and suffering again last summer, many hedge funds
dread being caught out again by sharp volatility.

"Everyone's just being super-cautious," said one prime broker who
questioned not to be named.


Oil surged to its highest level since August 2008 on Thursday, as
skirmishes between Gaddafi's supporters and demonstrators seeking an
end to his 41-year authoritarian rule could encourage leadership
challenges in other oil producing countries like Saudi Arabia

But the potential threat to oil supply -- and the political response
to the crisis -- remains unclear.

"None of the major players reported to be operating in Libya has seen
increased small promotion -- yet," Alex Brog, an analyst at Data
Explorers, one of world's largest providers of data on long and small
interest in listed companies.

Libya is Africa's third-largest oil producer and has the continent's
largest proven reserves, estimated at 2 percent of world supply, but
small interest in several firms exposed to Libya such as Eni
(ENI.MI), Repsol (REP.MC), Statoil Asa (STL.OL) and Total SA
(TOTF.PA) remain low, Data Explorers said.

But, Pedro de Noronha, administration partner at Noster Capital, said
he has raised exposure to oil and oil-related companies to 14 percent
from 9 percent as Libya's crisis erupted, believing OPEC's spare
capacity is well below the estimated 5 million barrels per day.

Source: Reuters.Com