Hedge funds caught in short squeeze

Globe and Mail- Hedge funds may post their worst month in at least five years after bets on financial stocks falling and on crude oil rising backfired.

Hedge Fund Research Inc.’s Global Hedge Fund Index of more than 55 funds slid 3.2 per cent through July 24, heading for the biggest monthly drop since the measure started in 2003.

Wagers on a drop in financial stocks and home builders soured after shares of U.S. mortgage lenders Fannie Mae and Freddie Mac more than doubled during the six trading days to July 23.

Bullish bets on crude oil turned to a loss as oil slid 15 per cent from a record $145.29 (U.S.) a barrel on July 3 after doubling in a year.

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