Hedge Funds for a Choppy Market

Now that volatility has returned to global markets with a vengeance, investors with money in hedge funds may want to think about choosing strategies that actually benefit from a good shake.

Analysts in Credit Suisse’s Private Banking and Wealth Management division say tactical trading strategies such as those used by global macro, and managed futures do better during extended market moves and rising volatility across asset classes.

Global macro funds try to take advantage of broad macroeconomic trends using a variety of instruments, including currencies, stocks, bonds, and futures. Managed futures are exactly what they sound like – actively managed investments in futures contracts of all kinds.

 Long-short equity funds can also deliver during uncertain times, as they allow investors to take advantage of pricing discrepancies during big market swings. During a jittery month in July, when equities in China and other emerging markets came under intense selling pressure, West Texas Intermediate crude oil prices fell 21 percent, the dollar strengthened, and commodities from sugar to gold suffered heavy losses, all three strategies showed their mettle.

 Managed futures outperformed any other hedge fund strategy (up 4.3 percent), long/short equity came in second (up 1.5 percent), and global macro came in third (up 1.3 percent).

 The strategies did not prove bullet-proof during August’s massive sell-off, with all three sustaining month-over-month losses. Their one-year returns, however, remain in positive territory and continue 

source : www.thefinancialist.com