Risky business

October 01, 2011   Jan Alexander

Today’s volatile market is forcing hedge funds to play it safe

  
 
 

Illustrations: Shout

Are hedge funds suffering a crisis of faith? Fund managers have moved money out of the market to record-high cash levels, leverage is historically low, and few managers have figured out how to profit from the wild swings in the market.

It might seem counterintuitive that hedge fund managers have become so risk averse. But performance was sluggish this year even before the markets turned violent in August. Then, in what seemed like a perfect environment for players known for their prescient market calls—not to mention their ability to short—one might have expected them to rebound. Instead, the losses started to mount.

With the experiences of 2008 still fresh, many managers are finding few trades where their conviction is strong. The stock market is difficult to time because of today’s rampant volatility. With interest rates so low, fixed-income markets are almost played out,...

Subscribe

Subscribers have unlimited access to all online content inc rankings. Start your subscription today - click on the button below.

Subscribe now

Free trial

Taking a free trial will give you access to online content one week (excludes research & rankings). Start your trial today.

Free Trial




Latest Poll

Who will top Alpha's Rich List in 2014?

 - 39%
 - 28%
 - 11%
 - 17%
 - 6%

View previous results