This year presents an attractive environment for active hedge fund managers, as 2011 will continue to be a macro-driven, volatile investment environment, according to fund of hedge funds Castle Alternative Invest.

Thomas Weber, chief investment officer hedge funds, LGT Capital Partners and lead portfolio manager of Castle Alternative Invest (Castle AI), explained: “We believe that monetary stimulus will continue to drive markets over the next three to six months. As a consequence, we expect the economy will continue to follow a slow, uneven recovery path, and that low interest rates will suppress the negative side effects and long term damages of the intervention measures introduced during the crisis. Our risk scenario has changed from that of a double dip scenario to a classic boom scenario, which could lead central banks to start tightening early and surprise the markets.”

Weber also explained Castle AI’s changed investment strategy: “We have changed our underweight position in long/short equity to a normal weighting, as we expect equity markets to continue to develop positively in the next few months. We remain underweight relative value strategies as opportunities in these sectors are better exploited through macro directional strategies than through relative value spread strategies. Within event driven we are underweight mainly credit related strategies, but see opportunities in the equity related special situations sector.”

In 2011 four core investment themes remain important, according to Castle AI. The first is corporate activity, as post the financial crisis the winners have cash for acquisitions, and the losers need to restructure their balance sheets, creating opportunities for special situations and M&A hedge fund managers. Emerging markets also remain strong and managers should be able to profit from market volatility and security selection.

Fuelled by strong global demand, loose monetary policy and constrained supply, natural resources are also an asset class worth looking into., Castle AI added. Lastly, investors should look at sovereign risk sensitivity, as liquid, active fixed/income rate and FX trading strategies have the ability to take advantage of situations such as the recent turmoil in Europe.

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