Last checked at 
By Laurence Fletcher
LONDON, March 19 (Reuters) - Investors betting that actionsby policymakers will prop up financial markets indefinitelycould be making a "serious error", says Brevan Howard, one ofthe world's biggest and most respected hedge fund firms.
The comments by Brevan, which manages $40 billion and whoseMaster fund has never had a losing year, comes as Europeanpoliticians wait to see whether debt-laden Cyprus will accept aninternational rescue and avoid a default that would shake theeuro zone.
"Looking forward to 2013, the tail risks which have hauntedthe markets for the last five years appear to have receded forthe time being, but have by no means disappeared," Brevan saidin a report by listed feeder fund BH Macro published onTuesday.
"Having faith in policymakers' ability to provide aperpetual put may yet prove to be a serious error; and, withinterest rates stuck at zero, investors' ability to easily earnback losses remains severely impaired."
A put option gives an investor the right to sell an asset ata pre-agreed price within a specified time, irrespective ofwhether the underlying value of the asset falls.
Markets have rallied strongly in recent months afterEuropean Central Bank head Mario Draghi pledged in July to do"whatever it takes" to protect the euro zone from collapse,cementing the view the single currency bloc was not headed forimminent break-up.
U.S. markets have also been boosted by bond buying by theFederal Reserve, while the new governor of Japan's central bankis expected to pump huge amounts of yen into the economy.
However, global stock markets fell on Tuesday, extending theprevious day's decline as investors continued to fret aboutCyprus.
Brevan said it was more optimistic about the opportunitiesfor macro trading - investing in instruments that fluctuate withchanges in economic policy - than for some time.
"Policy hyperactivity coupled with investor apathy couldlead to significant and persistent price moves in multiplecapital markets," Brevan said.
It said the Master fund had a "risk on" positioning whileits overall risk levels were moderate.
