BusinessWeek – The battering that U.S. stock indexes have taken since the financial crisis escalated in late September has largely been the result of forced selling by mutual and hedge funds in need of cash to meet rising redemptions as fund holders head for the exits.

And as the crisis drags on into late November, investors’ attempts to square their accounts before yearend is exacerbating fund withdrawals.

While most funds typically keep at least 3% to 6% of their portfolio’s holdings in cash, the relentless selling pressure has ignited a vicious cycle that makes fund outflows even larger than normal.

Read Complete Article

Tags: contagion, economic-shocks, medallion, new-york-mercantile, oeh, sportsnet, wealthy-folks

Reuters UK – Artificial intelligence is helping trend-following commodity hedge funds triumph in treacherous markets when human brains alone aren’t enough.

With industry data showing the average hedge fund down 20 percent or more this year due to strategies messed up by plunging commodity and stock prices, some in the game called Commodity Trading Advisors are up 50 percent or more.

But the trend-following CTAs say it isn’t all their work: credit should also go to their computerized trading systems.

"It’s like a computer playing chess against an excellent individual chess player," said Bernard Drury, president and chief executive at New Jersey’s Drury Capital, a CTA relying entirely on systemic trading or trading without discretion.

"The computer can be counted on not to make human errors, not to make a miscalculation, not to be tired and not to have a bad day," said Drury, whose systemic flagship fund is up 57 percent on the year managing about $155 million (98 million pounds) in commodity and financial investments.

CTAs count themselves as part of the $1.7 trillion hedge fund industry, trading in a wide array of markets that include energy, metals, agriculture, financial futures, bonds, stock indexes and currencies. Like hedge funds, they have management fees of 2 percent and performance fees of 20 percent and strive for alpha, or performance beyond market expectations.

Read Complete Article

Tags: computer-program, economic-shocks, equity-funds, investment-arm, legal-showdown, market-experts, new-york-times-co, reverse-takeover, sales-momentum, simulation-engine, traditional-investment-portfolios