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'Market-Timing' Hedge Funds May Be Forced To Adapt

by Philip Morton, Investors Offshore.com

11 September 2003

A Reuters report published in the wake of the recent outcry over alleged improper share trading carried out by the Canary Capital Partners hedge fund in consort with several mutual funds, has cast a spotlight on the hedge fund strategy of market timing.

'Market-timing' hedge funds are one of the most secretive sectors within the industry. According to Reuters:

'By trading in US funds that often hold foreign stocks where active trading stops long before a closing price is set, many hedge funds carved out a lucrative business whose success depended a lot on not being noticed.'

However, the probe currently being conducted by New York's Attorney General has reportedly spooked many industry players, meaning that the strategy is likely to drop in popularity. Speaking to Reuters, an unnamed hedge fund manager observed that:

'Hedge funds make money with the latest idea and we'll just have to go out and find another one now.'

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