Vulture Culture

March 01, 2012  

Europe’s economy is in ruins, but hedge fund managers say these analysts excel at spotting opportunities.

By Thomas W. Johnson

The news out of Europe has been relentlessly grim: multiple sovereign debt downgrades, declining economic growth, rioting in the streets over austerity measures, political gridlock. Traditional long-only investors have largely fled the region for safer havens, waiting for a return to normal - whenever that might be - before reinvesting.

Many hedge funds, however, continue to seek opportunities hidden in the scorched economic landscape. "European markets in the past year have been obsessed with political brinkmanship and thus been characterized by volatility and high pairwise correlations," explains David Tovar, co-founder and head of research at London-based Skyline Capital Management, a $50 million-plus hedge fund launched in November 2010. "While this can make it difficult for long-short equity fund managers in the short term, we believe that high correlations also create a big medium-term opportunity. At Skyline our approach is to focus on the facts, avoid consensus positioning and...

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