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Equity Strategies Suffer Most In Bleak Month For Hedge Funds

by Phillip Morton, Investors Offshore.com

11 November 2005


With most hedge funds reporting negative results for the month of October, those trading equity related strategies appear to have been the hardest hit as stock prices fell during the month, according to the French business school Edhec.

Even though Long-Short equity hedge funds have the ability to profit from shares whether they are falling or rising in price, Edhec reported that these strategies lost on average 2.41% during October, bringing year-to-date returns down to 2.13% overall.

"The month of October was characterised by the poor performance of global stock markets," Edhec observed in a statement.

"Value and small cap stocks performed even worse than the broad stock market. Stock market volatility rose," the business school added.

Standard & Poor's, which published the monthly performance data of its S&P Hedge fund Index on Thursday, backed up the findings of Edhec as it revealed a 1.91% loss for its Equity Long/Short index for the month of October.

“Hedge fund performance was influenced by a number of factors in October, most significantly by a substantial pullback in the global risk appetite," observed Justin Dew, Senior Hedge Fund Specialist at Standard & Poor’s.

“For hedge fund returns to be strong there needs to be a desire by investors to take on risk, that just isn’t happening at the moment," Mr Dew added.

Overall, the S&P Hedge Fund Index declined by 0.47% in October. The index is up by 1.94% on a year-to-date basis.

A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, and hedge funds is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp

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