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Time up on Trump trade, hedge funds look abroad

Before this week’s selloff U.S. stocks had climbed roughly 10 percent since Trump’s election victory in November.

Ben Bernanke, former chairman of the Federal Reserve, speaks at the SALT conference in Las Vegas, Nevada, U.S. May 17, 2017. REUTERS/Richard Brian

“All honeymoons end and we are now learning the challenges of living with our new partner,” said Chris Henetemann, who runs structured credit specialist hedge fund 400 Capital Management.

Only a few months ago, Nolte’s SkyBridge portfolio of investment managers focused largely on the United States, he said. Now they have shifted money to investments in Europe and he expects to continue adding assets there later this year.

That strategy could include allocating more money to managers such as Daniel Loeb’s hedge fund Third Point after he recently told his clients that he is seeing opportunities in Europe.

“Dan might like Europe more and we might like Europe more,” Nolte said.

But Europe is the not the only place where investors are turning.

“The valuations outside the U.S., especially in the emerging markets, might be more attractive,” Adam Blitz, chief investment officer at Evanston Capital said.

The MSCI emerging markets stock index .MSCIEF is trading up 14.8 percent year to date with a 12-month forward price-to-earnings ratio of 12.1 percent versus a 5.7 percent gain for the U.S. benchmark S&P 500 index, which sports a 12-month forward price-to-equity ratio of 17.7 percent.

Still, emerging markets were also showing signs of unease on Thursday amid a broad flight to safety as well as Brazil’s own political turmoil.

Brazil’s benchmark Bovespa stock index .BVSP was down 9 percent on the day, paring earlier losses that had marked its biggest drop since the 2008 financial crisis. MSCI’s emerging market index fell for a second straight day.

Looking ahead to the next winning investment, Cartica Management chief CEO Teresa Barger, who currently likes investments in India, said it was bound to be small and obscure; “it may be Nigeria.”

(Additional reporting by Daniel Bases; Editing by Meredith Mazzilli)

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