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Money managers under the microscope

Short-sellers back in the money for now

November 11, 2009

For better or worse, hedge fund returns have a tendency to follow markets, in part because most long-short funds are net long most of the time.

rtxak52So after a huge rebound in the stockmarket this year, which has helped hedge funds make up some much-needed ground, October proved a difficult month when the market fell in the second half of the month.

After all 2009′s growing optimism, investors were suddenly concerned that a withdrawal of government stimulus would harm an economic recovery in its early stages.

So, after a bumper 2008 and a miserable 2009 for short-sellers, it was they who leaped to the fore again in October - dedicated short bias returned 1.61 percent, while long-bias funds lost 0.38 percent and long-short funds were flat.

However, the long bet may not be over for hedge funds. John Paulson, the man who made billions betting on the subprime crisis and profited last year from shorting banks, is going long Cadbury.

With 2.54 percent of the chocolate maker, Paulson’s move may show that, despite this year’s huge rally, there may be more upside left in some stocks.


They say “go on now go”, “walk out the door”,
“Just turn around now, ’cause you’re not welcome anymore”
Weren’t you the one who tried to stick to the strategy,
That read that if you get advised by us, we’ll throw some debt in there for free”
I should have split the firm apart,
I should have sold it bit by bit,
Like all the analysts told me,
Now it’s all just gone to shit,
At least I’ve got my options when I leave,
Although they don’t amount to much today,
But once I’m gone the price will soar,
And I’ll get my sky high pay day.


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