Long only funds sitting on 30-50% cash: F&C Investments

Jeff Chowdhry, Head Emerging Equities, F&C Investments, said the markets will remain fairly volatile till the year-end. He said investors are still nervous on the economic outlook. According to him, redemptions continue to be quite high, particularly among hedge funds and some long only funds.

Choudhry said "Asia and emerging markets haven’t been spared from this redemption pressure but we are seeing redemption right across the board, and a lot of hedge funds and long only funds are sitting on 30–40–50% cash at this point in time."

Here is a verbatim transcript of the exclusive interview with Jeff Chowdhry on CNBC-TV18. Also watch the accompanying video.

A: The markets will be fairly volatile between now and year-end, and we have got a couple of competing factors. One is the fact that people are still very nervous on the economic outlook and the only thing that we have got is the fact that redemption still to continue to be quite high, particularly, amongst hedge funds and some long only funds.

Q: Interesting you say that. Is this redemption specific to emerging markets and Asia?

A: It is right across the board. Asia and emerging markets haven’t been spared from this redemption pressure but we are seeing redemption right across the board, and from what I hear and see, a lot of hedge funds and long only funds are sitting on 30–40–50% cash at this point in time.

Q: What seems the most likely outcome by the end of this year to you? Do you see most markets put on a bit of weight that they are ranged or that we actually still have the October lows to contend with and get back to?

A: My best guess is that markets will end the month higher then from where they are. The selling pressure will probably abate in the next couple of weeks and then people will probably close their books and hope the year-end early. So the markets will end the year a little higher than where we are today.

Q: What's the general sense you get from your peers about the terror incidents in Mumbai? Do you think it is affecting investor sentiment or might lead to any kind of outflows or investors are dealing with that pretty well?

A: Absolutely. On the contrary, the unanimous view is that this terror in effect is not going to have any effect long-term on the outlook for the market. For example, we had a large number of buy order sitting in the market on Friday waiting in case of the panic sell-off. There was no sell-off and all buy orders weren’t even filled. Most people are looking through this and saying what are the long-term fundamentals. As I said a couple of weeks ago, we are on a sort of one to two-year view. We are very attracted to some of the blue-chips in India.