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Hedge Funds Look For Bounce Back

This article appears courtesy of Institutional Investor

Source: Alternative Investment News

Robert Murray

Hedge funds were hurt last month by the poor performance of global equity and bond markets, but they are already anticipating a bounce back. The hardest-hit strategies, including long/short equity and special situations, are among those expected to rally. Widening spreads will benefit relative value and event-driven investments, said Max Gottschalk , senior managing director at Gottex Fund Management . "There should be some good opportunities in the next couple of months," he ventured, adding that November has also started strongly for equities.

Long/short equity funds are thought to have suffered most in October, and the FTSE Hedge Global Index suggests an average drop of 3.5% for long/short managers. Many had increased their gross and net exposure to get more directionality, which paid off in previous months, said Scott MacDonald , director at Mellon Global Alternative Investments . "I think they got more long-biased than they ideally wanted to be." By reining in their long exposure once again, managers will likely gain back some of their October losses in the next couple of months, he said.

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