GLOBAL – Fund-of-hedge fund managers are suffering the worst market conditions for seven years, according to Standard & Poor’s.

“The second quarter of 2005 saw some of the toughest conditions experienced since the third quarter of 1998 for fund-of-hedge-fund managers,” S&P Fund Services said in a quarterly report.

"During April through to mid-May, fixed income and convertible arbitrage were the worst performing sectors. Equity long/short and managed futures also had a tough time," said analyst Randal Goldsmith.

"Among the 27 funds rated by Standard & Poor's, the strong performers were generally those with a directional bias, benefiting from the strong recovery in equity markets that began in May."

Meanwhile, a top executive at JP Morgan has said hedge funds are not major players in the European mergers market.

"Hedge funds are vocal, they keep people on their toes and introduce Anglo-Saxon shareholder thinking into corporate Europe, but I don't see them going around looking for companies to put into play," Klaus Diederichs, head of European investment banking, was quoted as saying by Reuters.

Yesterday a senior official at the International Monetary Fund told IPE that the Dutch financial market regulator AFM was right to be concerned about transparency at hedge funds.