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“The ‘Great De leveraging’ continued in October,” says Sol Waksman, founder and president of BarclayHedge.
“Investors as well as hedge funds and banks continued selling in order to reduce risk exposure in their portfolios and raise cash.”
“The result has been a significant year-to-date drop in equity prices, with US markets down 30 percent, other developed markets falling 40 percent, and emerging markets losing as much as 50 percent of their value.”
The Barclay Emerging Markets Index was down 15.83% in October, and has lost 25.11% in just two months.
“It’s estimated that US investors hold some 5 trillion USD in foreign equities,” says Waksman. “Those holdings are now being liquidated.”
Convertible Arbitrage dropped 12.22%, and has lost 20.45% in September and October.
“The short sale ban created an impossible situation for convertible arbitrage funds,” says Waksman. “Selling stocks short is a key factor in the viability of the strategy.”
The only successful strategy in 2008 has been selling the equity market short. The Barclay Equity Short Bias Index had another strong month, gaining 17.21% in October.
“While Equity Long Bias funds have lost 25 percent of their value in 2008, Equity Short Bias funds have gained 43 percent,” says Waksman.
“The key factor in 2008 has been which side of the market you trade. It’s been tough for traders on the long side, whereas short traders caught a big wave.”
Year-to-date, the Barclay Hedge Fund Index has lost 19.30%, compared to a loss of 30.84% in the S&P 500.
The Barclay Fund of Funds Index lost 5.21% in October, and is down 17.33% in 2008.
Click here to view five years of Barclay Hedge Fund Index data, or download 11 years of monthly data.
Sol Waksman is an experienced media source, providing perspectives on hedge fund and managed futures trends. For quotes, commentary or background, call 641-472-3456 or email swaksman@barclayhedge.com.
BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks 6,700 hedge funds, funds of hedge funds, and managed futures programs. Barclay has created and regularly updates 18 proprietary hedge fund indexes and eight managed futures indexes.
Institutional investors, brokerage firms and private banks worldwide utilize BarclayHedge data as performance benchmarks for the hedge fund and managed futures industries.
