Hedge Funds Move With The Markets08.16.2011
Shrewd hedge fund managers have been taking advantage of the increased volatility in the markets and jumps in volume as they quickly maneuver in and out of positions. The wild market swings have been welcomed as new opportunities as some funds stress over performance in long-term equity positions.
The most recent performance on the Dow Jones Credit Suisse Hedge Fund Index indicates that long/short equity funds are stemming losses and taking profits with performance of -0.41 percent for July compared to -1.49 percent in June.
Managed futures funds and CTAs lucked out as last week’s market turmoil drove some investors to the sector. The S&P downgrade combined with uncertainty about the U.S. Dollar left many investors scratching their heads on where to allocate cash or how to mitigate risk.
Bans on short selling throughout Europe only angered portfolio managers as they argued against the move. Trade group Alternative Investment Management Association or AIMA came out came out with a statement against the ban.
“We do not think these bans will help the current market situation,” AIMA CEO Andrew Baker said. “Past experience has shown that bans on short selling do not prevent market falls and indeed can exacerbate volatility. Independent academic research also supports this conclusion.”
As the price of an ounce of gold shot up last week before correcting, the price increase can be partially attributed to both central bank buying and hedge funds flexing their buying power muscle, bidding up the price of gold and other precious metals that were viewed as something of a safe haven for investors.