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Alternative Market Briefing

Hedge fund managers wary of 2010 when large long-only investors will cease 'buying the dips'

Wednesday, November 25, 2009

From Kirsten Bischoff, Opalesque New York:

On the heels of losing 23% on bearish views during 2009, John Horseman recently announced he would be stepping down from managing his long/short fund. Horseman cited stocks rallying not on economic growth but on cost cutting, and he expects the current non-recovery will make the markets very volatile and unable to gain momentum over the next decade.

While Horseman anticipates the market environment of the next decade, many long/short managers are trying to determine their expectations for the next 2-3 months. Whereas bull markets typically end the year on high notes with strong fourth quarter performance, there is a level of wariness on the part of managers who regained 2008 losses during 2009.

In addition to securing gains that have finally brought many funds back above high water marks, hedge fund investors still frustrated by 2008 performance have made it clear that the promise of absolute returns is one that needs to be fulfilled. "There is still a sense of skepticism in the valuation of this market right now," Paul Britton, CEO of volatility trading firm Capstone Holdings Group told Opalesque.

As the year ends long/short managers have lagged slightly behind the rally, focusing on protecting gains and closing down the bulk of their risk, holding tight for the end of the year.

Market nervous for 2010 The market jitters being expressed throu......................

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