October 21, 2011 / 8:10 AM / 6 years ago

Fortress eyes new Asia fund in 2012, sees Europe risks

SINGAPORE, Oct 21 (Reuters) - Fortress Investment Group LLC plans to launch its second hedge fund in Asia next year that would trade volatility and aim to protect investors from tail risk, or rare and extreme events in financial markets.

"We're starting a vol-based (volatility-based) convexity fund sometime next year," Adam Levinson, chief investment officer of the Fortress Asia Macro Funds, told reporters in Singapore.

He did not provide size of the fund or other details, however a fund manager said that such funds protect investors from market volatility and "tail risks".

The U.S. hedge fund manager, which manages about $44 billion, currently operates an Asia macro fund. It opened an office in Singapore last year.

The Fortress Asia Macro Fund, which fell 2.5 percent in September, is down 1.23 percent for the year.

Levinson earlier told a conference at a local university that the investment environment in Asia is affected by the debt situation in Europe, which is fluid and could either result in a modestly positive outcome or a complete mess.

"In either case you are destined for a significant recession in Europe next year," he said, adding that would cement the case for low interest rates around the world.

The leaders of France and Germany will discuss in detail a comprehensive solution to the euro zone crisis at a summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest.

Levinson, an ex-fund manager at Tudor Investment Corp and a former proprietary trader at Goldman Sachs , said Japanese bank debt, certain real estate investment trusts and long-end of the Indian bond market would be good investment themes.

"The most controversial is the long-end of the Indian bond market, which is predicated on inflation coming down dramatically next year," he said.

India's central bank has raised rates a dozen times since March 2010, but with no sign of a cooling in prices, another rate rise looks likely at its policy meeting on Oct. 25.

Levinson said he would favour REITs that are not heavily leveraged amid low interest rates. He did not identify those companies.

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