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Money managers under the microscope

It happens to the best of us…

March 5, 2009

Even the best hedge fund managers can sometimes get things wrong when markets are so volatile.

In his latest letter to investors star manager Tim Russell, the head of pan-European equities at Cazenove who made 9.4 percent last year in one of the toughest equity markets in living memory, reported a 4% loss in February.

rtr1ygc1“We will not look back fondly at February 2009 as we endured a torrid month with hardly an up day to be seen,” he tells clients.

“Net long was wrong, long defensives was painful, long large-cap wrong, short mining and housebuilding wrong and to compound things what we did do (covering long-held property shorts) was not helpful either.”

Russell was primarily hit by sharp drops in stocks such as Legal & General in the insurance sector — ironically an area that has come in for shorting by a number of hedge funds recently — as well as in stocks seen as more defensive, such as AstraZeneca, VT Group and Imperial Tobacco.

Meanwhile, short bets on miners such as Rio Tinto, Kazakhmys and Antofagasta also hurt performance.

But the experience hasn’t caused Russell to change his positions — he sees the danger of being whipsawed, or selling just before a sharp turn in the market — and he continues to think defensive stocks are cheap.

“Does it (February) tell us a lot about what we should do?” he writes. ”We don’t think so.”

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