Hedge Funds Cautious in December

Hedge Funds Cautious in December

Hedge Funds Cautious Over Ending 2009 With Losses

Hedge funds have made tremendous gains this year and managers are not about to lose it in the final months.  Since October and through December, many hedge funds have been settling for more modest gains to avoid falling victim to a sting in the tail end of 2009.  This means a reduction in leverage and a slowing in big bets, which does not necessarily mean lower gains.
Prime brokers and managers say some funds in the secretive industry have decided to cut back risk after the market's fall in late October, so as not to endanger gains which have reached an average of 15.1 percent in the first 10 months of the year, according to Credit Suisse/Tremont.

"Leverage is coming off towards the end of the year. Hedge funds are happy to take what they've got from 2009," said one prime brokerage executive, who asked not to be named.

This year's gains have been helped by a rebound in asset prices. The FTSE 100 .FTSE for instance is up by more than 50 percent since its March low, while convertible bonds and credit have also risen sharply in value.

That comes after a turbulent 2008, when funds lost an average 19 percent, damaging a reputation acquired during the dotcom bust for making money in all market conditions, and heavily shrinking the size of the industry.  Source

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