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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Last year the average return was around 7.5 percent and in 2004 the figure was around 9.5 percent.<\/p>\n
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.<\/p>\n
“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.”<\/p>\n
Long\/short equity hedge funds buy stocks they see as cheap and short sell those they think are expensive.<\/p>\n
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.<\/p>\n