The Sunday Times – HEDGE fund managers who fail to hedge were blamed yesterday for a prolonged bad patch for the industry that has now stretched into its fifth month.
Hedge funds have increasingly been placing directional bets on rising share prices and were badly caught out when equity markets dived in May and June.
Some then compounded the error by losing their nerve and failing to position themselves for the bounce in equities that duly occurred in July.
John Godden, chief executive of IGS Group, which advises on hedge fund investment, said: “It seems that a lot of hedge funds have played the directional ticket and that has backfired.â€Â
Mr Godden was responding to new provisional figures from MSCI Barra, the index compilers, which showed that hedge funds open to new business have lost their investors money for 4½ months.
Few hedge funds are entirely market-neutral, with most in effect preferring share prices to rise rather than fall. But the share market recovery of the past three years has persuaded more and more to bet “long†and fewer and fewer to take compensating “short†positions.
