While economic downturn remains a prime concern, managers of funds of hedge funds have discovered potential profit-making opportunities from the current market volatility, according to a Reuters poll. Six of the twelve managers surveyed in the U.S. and Europe favored event driven strategies as delivering the best returns in the final quarter of 2007, and first quarter of 2008. The previous quarterly poll, also favored the same strategy, which aims to take advantage of companies involved in takeovers, mergers or bankruptcies. However, the survey of managers, who collectively control assets worth USD 141 bn (70 bn pounds), showed a shift away from pure takeover activity, seen as one of the main drivers of profits in the earlier poll.

This trend corresponds to a sharp drop in M&A activity since the global credit crunch took hold in August. Events similar to company restructurings and more defensive strategies such as fixed income and global macro economic managers are coming increasingly into focus, the October poll revealed. Kris Carlo Raecke, portfolio manager at Union Bancaire Privee in Geneva said "Volatility could well pick up going into next year and global macro managers are best equipped to deal with that." He added that tightening credit conditions made it tougher for leveraged deals for event strategies to prosper, but create opportunities in fixed income and distressed debt. "Default rates have not picked up, but there are a lot of securities trading at distressed prices even though the company is not distressed."

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