Following the sub-prime mortgage meltdown and subsequent credit market contagion, 2007 turned out to be pretty gruesome for banks. And a widespread perception has built up – even within the financial media – that it was also bad for hedge funds.
The reality could hardly be further from this perception. In fact, 2007 was a massive year for many hedge funds – if with a lot of dispersion among the returns of hedge funds overall. Some of the big players made their best returns ever, and many billions in profits.
Of course, there were hedge funds that lost money in 2007. Some went out of business – as happens every year. And managers focused on two strategy areas in particular – structured credit and equity market neutral – were caught in the limelight for the wrong reasons.
Among those who made the wrong calls...
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