June 30, 2006

Decline in Hedge Fund Returns Due to Market Turmoil

The recent market turmoil has negative impact on a number of hedge funds. Most of them have had their gains wiped out in the past few weeks. Although almost all the hedge funds worldwide suffered due to the market turmoil, Japan-focused hedge funds have been worst affected due to the fall in the Nikkei. Seven of the 10 worst-affected hedge funds belong to Japan. Emerging markets and European funds are also affected. The month of June witnessed heavy losses for many hedge funds, as managers were overly bullish and took on too much advantage. Some British hedge funds also registered net losses in the past couple of months.

According to The Australian -

Big hedge fund investors cautioned against reading too much into a poor month or two. Some participants surveyed blamed the weakness on excessive bullishness and complacency about risks in a volatile period. US market indices have fallen more than 2 per cent in June, European stocks are off between 3 per cent and 6 per cent, and Japanese indices are down 7 per cent.

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