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.<\/p>\n
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.<\/p>\n
Some then compounded the error by losing their nerve and failing to position themselves for the bounce in equities that duly occurred in July.<\/p>\n
John Godden, chief executive of IGS Group, which advises on hedge fund investment, said: \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cIt seems that a lot of hedge funds have played the directional ticket and that has backfired.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d<\/p>\n
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 4\u00c3\u201a\u00c2\u00bd months.<\/p>\n
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 \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201clong\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d and fewer and fewer to take compensating \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cshort\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d positions.<\/p>\n