Greek crisis, China crash and low rates: hedge funds’ horror year.The panic that swept the markets in August was tough for investors the world over, but particularly for the macro hedge funds, who bet big on economic trends.
Despite a reputation as “the smartest guys in the room”, earned from promises to defy market volatility with complicated trades, hedge funds suffered some of the most startling losses in the stock market bloodbaththat started in China in June and sent the London market reeling by August.
Third Point, the $18bn (£12bn) fund run by the American billionaire Daniel Loeb, has described recent trading as “a harrowing round trip”, with danger lurking in China that “seems more intimidating than ever before”.
Even Crispin Odey, the London hedge fund manager who made about £225m from a bearish stance against China this summer, concedes that his industry has had a difficult 2015. “No one is covered in glory this year. When you have zero interest rates for a long time you end up with misallocated capital… All you can do is think about how long this equilibrium can last.”
A bruising year for the hedge funds, while hardly tugging at the heartstrings of most ordinary savers, has potentially wide-reaching effects. About one in every four pounds in hedge funds worldwide is managed on behalf of pension funds, according to the industry trade body AIMA, putting many of us on the hook for these disastrous bets.
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