'The central banks are endeavouring to make people take more risks. If they do, that will keep confidence levels at a point where they are self sustaining. But the danger with confidence is that if it breaks it is very hard to rebuild.'

He sees potential for further gains in equity markets, particularly in Asia-Pacific, and has been gradually building the risk profile in the funds that he manages. 'If you could cut Asia off from the rest of the world in terms of equity valuations we could be far more bullish,' he says. 'The problem is you can't have one without the other; you can't export product out of Asia to the rest of the world without expecting Asian equity values to be affected.'

As the manager of JF Asia's Absolute Return Fund - one of a handful of hedge funds authorised for retail sale - he and his team try to run a 'best ideas' fund. It is an aggressively managed portfolio of equities, bonds, currencies and derivatives in Asia-Pacific that can take long and short positions.

Currently at about US$90 million, the fund will be capped at the end of the month.

'It is a timely move to protect the interests of existing unit-holders as we believe that additional inflows into the fund may dilute performance at a time when lower liquidity in Asian markets has reduced opportunities,' said JF Funds chief executive Douglas Eu.

The fund has been part of the JF range since 1998 and was run by former chief investment officer Roger Ellis, who left the company in March. It was initially offered to institutions and high net worth investors before being authorised for retail sale in December.

Mr Geldard acknowledges that the fund has been 'flatlining' in a transition period. It had a zero return in February, followed by two months of 0.2 per cent gains and a rise of 0.9 per cent last month. So far this month it has risen about 2 per cent. Over the five years since inception the fund has gained a staggering 886 per cent.

'When a fund manager leaves there is a tendency for people to take a lot of money out, so we had to raise quite a lot of cash in anticipation so as not to hurt the existing investors,' he says. 'In reality we got very few redemptions and as such we could have run a more aggressive position. But we didn't want to find ourselves being forced sellers in a poor market.'

The fund size has dropped to around US$90 million, from US$160 million in March.

It set out in 1998 with long, speculative position in equities, particularly in Japan. There was a blip in early 2000 as those positions were unwound followed by a focus on currency positions in 2001 and 2002. Gold stocks were also a feature last year. Mr Geldard admits the fund missed out on some potential gains earlier this year due to its high cash content during the transition, but has now quadrupled its risk and gradually accumulated much longer positions.

JF is awaiting approval to expand its hedge fund range, and may open the JF Asia Absolute Return Fund for new subscriptions in future. While alternative investments remain a small portion of its assets, the fund house believes they offer investors diversity as part of an overall asset allocation strategy. Traditionally, long-only funds do better when markets are on the rise, but hedge funds can react to different circumstances.

'We as long-only managers may be very negative on certain companies and may not own them, but we cannot actually express the view to be short on them,' Mr Geldard says. 'With this absolute return fund I may have a colleague managing an Australian portfolio who sees a company that he thinks is dreadful. With the hedge fund, I can actually short that stock.'

PROFILE

1982: Graduated from Oxford University

1983: Trainee with Merrill Lynch in New York

1985: Joined James Capel in Hong Kong

1989: Bankers Trust in London

1991: James Capel in Tokyo

1994: Adviser to central bank of Botswana

1997: Manager with JF Funds

2001: Managing director of JP Morgan Fleming Asset Management