Reuters – Hedge funds have scaled back their expected returns for the year following large losses in May and June on stock market bets, a survey of delegates at a hedge fund conference showed.
The survey by organisers ICBI showed that less than 10 percent of those who responded expected average hedge fund returns to be more than 9.5 percent in 2006.
That is below the 12 to 15 percent many were expecting in April after a strong first quarter when the average was already at around 7.5 percent.
Last year the average return was around 7.5 percent and in 2004 the figure was around 9.5 percent.
Worries about rising inflation, higher interest rates and a global economic slowdown punctured sentiment in May, stock prices fell and markets have since been volatile.
“There is a small chance we could see a pick up,” one hedge fund manager said. “But it’s unlikely because so much of the money is in long/short equity.”
Long/short equity hedge funds buy stocks they see as cheap and short sell those they think are expensive.
But overall they normally have more long positions than short and between 30 and 40 percent of their returns come from stock prices trending higher.
