Market Neutral Strategies Remain Profit Lite

Difficult markets in August left many hedge funds seeing red despite the fact that most major indices around the globe ended the month in positive territory. But September was an entirely different affair a veritable turkey shoot in comparison.

Indeed, mutual funds had it easy, riding the market for all it was worth. And hedge funds generated positive returns, net of fees. But not all strategies are created equal, according to an Index compiled by Hedge Fund Research.

The Hedge Fund Research investable index showed that of the eight hedge fund strategies it details, six had made a profit in September. Global macro and managed futures was the best performer with a 3.24% return, while convertible arbitrage gained 2.34%. The two losing strategies were equity market neutral funds which were down 1.48% in September, and distressed securities funds, which were down 0.62%. Institutional Investor

The lagging returns in market neutral strategies might have led to an additional unwind of these trades in late September. Several folks we know that suffered with the quants in August mentioned that saw similar, if moderate, price action going into the end of September. Perhaps they were positioning themselves for redemptions, but market neutral stategies are likely to come up on the short end of the stick as we close up the year.

Of course, allocating money here when the strategies are unpopular might be wise. And if you need excitement, you can always trade Baidu.

Hedgies Up After Tough Summer
Institutional Investor

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