WEST PALM BEACH, FL (HEDGECO.NET) - “Meltdown May” is a catch phrase for weary traders and managers who remember last year’s volatility in the hedge fund market. Now they are beginning tobelieve that this year’s troubles could be far worse.

May has seen tough trading conditions that may mark the end of earning easy money. The $1.5 trillion hedge fund industry has seen a sell off in prices of precious metals prices in emerging markets and analysts blame fears of inflation and rising rates for the sudden drop.

Volatility in commodities markets has also significantly affected equity markets. Metal prices at the London Metal Exchange have witnessed choppy trading throughout the week, the BSE Metal Index lost 22 per cent since last Monday, Copper was hit the worst, but losses were not confined to metals, investors said. Global macro hedge funds that bet on currencies, commodities, and interest rates are said to have lost roughly 25 percent. Funds specializing in emerging markets were said to have given back as much as 50 percent.

In an interview with Reuters, Philippe Bonnefoy, who runs fund of funds Cedar Partners said, “People have given back a lot of profits and the rest of the year will be much more difficult to trade, with people becoming more sensitive to risk and making fewer bold moves.” Many of the world’s roughly 8,000 hedge funds lost between 3 and 6 percent in the first three weeks of May with some having seen swings of 10 percent or more, investors and researchers said.

Aaron Smith, managing director of Superfund Asset Management, said that gold, copper, and silver would climb further. The firm, which invests $1.7 billion, said its flagship Quadriga Superfund Series A fund lost 8.04 percent this month but is still up 4.64 percent for the year. Smith said to Reuters, “The weaker players could get knocked out and that would be a good thing.”

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

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