Long/Short Equities Fund Managers Roiled By Market Volatility

Hedge funds that try to beat the market through buying and selling individual

stocks have had such a rough go of things this year that a number of them are cutting back on their allocations.

Long/short equity managers recorded the heaviest withdrawal among various hedge fund strategies so far this year, accounting for $5 billion of the $9.4 billion outflows through November, according to Eurekhedge.

On a return basis, these funds lost 7.10% for the first 11 months of the year–a steeper decline than the 4.37% drop for the industry as a whole, or the flat S&P 500 index.

Seasoned stock pickers have found themselves working against the headwinds of the macroeconomic environment, which exerts unavoidable yet over-arching influence on all markets.

“In the past, it was fine for long/short equity funds to focus on company fundamentals. But with unprecedented government intervention, high-speed trading and the ability of investors to move billions of dollars through exchange-traded funds, this is no longer sufficient,” said Maria Tapia, a partner with fund of hedge funds manager Alternative Investment Group. “Managers now have to think much more about how companies are affected by the broader environment.”

Alternative Investment Group manages $1.5 billion in assets.

Larch Lane Advisors, which manages a $1 billion fund of funds, said some managers went overboard and engaged in trades that are beyond its mandate. “Some of the long/short equity funds are investing in gold and European sovereign credit default swaps. One might argue that it’s the right trade to put on or that one needs to find ways to hedge in the difficult environment this year. But this introduces basis risks,” said its head of research Ken Stemme.

Full article here-http://online.wsj.com/article/BT-CO-20111220-708822.html. Btw this article was by Amy Or. She is a fantastic journalist, who covers AIs for the WSJ. I read all here articles, and highly recommend it to all readers.

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

1 Comment on "Long/Short Equities Fund Managers Roiled By Market Volatility"

  1. Real Estates India | Dec 21, 2011, 12:54 am at 12:54 am |

    Excellent content – as you always
    provide and inspire me to come again and again. You are on my RSS reader now.

    Also, there comes a root valuable to
    heighten your altitude at realty bazaar is at present the sole prospect to the

    Herein, I am to drive you direct to
    the space of beneficial as well as space to living by:


    Link : Raheja
    Revanta Gurgaon




    Phone to tune in: +91 9811 999 666,
    +91 11 4950 0000.



Leave a comment

Your email address will not be published.