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AI market round up: Hedge funds in better shape than feared

A research note from macroeconomic research consultant Capital Economics says that current market turmoil will lead to hedge fund losses but performance won’t be as bad as feared, and investors are unlikely to turn away from the asset class.

Instead, investors will be more selective about the funds they choose. "Some hedge funds are likely to fold, but 7% of funds were folding each year in any case," says author Simon Hayley.

The reason for a more selective hand will be the lack of diversification highlighted by August’s returns. Correlations tend to rise during sell-offs, and "investors are likely to have over-estimated the degree to which moving into alternative assets would bring substantial diversification benefits".

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