Hedge fund report looks ahead and asks “How soon is it safe to invest again?”
Nov 12th, 2008 | Filed under: Hedge Fund Industry Trends, Today's Post
UK-based hedge fund consulting firm Allenbridge HedgeInfo published a report this week that includes what is likely the most comprehensive list yet of “urban legends” regarding hedge funds. Call it a myth-busting cheat-sheet if you will.
As Allenbridge CEO Christopher Miller (see related post) writes:
“The rationale for hedge funds is bruised but still valid. The saying that hedge funds can produce profits whether the underlying market is up or down is still true, but we now know what can happen when externalities happen, like removal of ability to short, exercise leverage or mass redemptions.”
Think the correlation between hedge funds and the equity market is up this year? Think again. According to Allenbridge, the 1-year r-squared of most hedge fund strategies is actually slightly lower than the 5-year r-squared (see chart below from report).
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