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Alternative Market Briefing

Hedge fund LJM Partners sees performance improve with volatility spikes

Tuesday, February 18, 2014

Bailey McCann, Opalesque New York:

The end of January and the first part of February saw a rise in volatility in the market. The January 24 spike was the first to kick off this trend which was the result of weakened emerging markets data. The polar vortex and associated winter storms which have hammered much of the US only served to add more support to the trend by causing drags on the US economy and GDP. Global headwinds like a weaker China are likely to keep volatility at more elevated levels throughout the year.

Since 2009, hedge funds have had a hard time accounting for lags in their performance given the strong run up in domestic and international equities. However, close watchers of the market will also know that the lack of volatility and opportunity on the short side of the portfolio is at least part of the reason for tepid hedge fund returns.

As that volatility came back, early hedge fund performance data for January shows that hedge funds have improved. Some of the biggest names including Pine River and Bridgewater saw rebounds.

In their monthly letter to investors, LJM Partners noted that January's positive performance numbers were the result of this newfound volatility in the market. The letter points to the January 24 spike as a moment of opportunity for the fund. "The VIX spiked over 43%, which is the 6th largest weekly percentage spike in the history of LJM’s trading record. While the strategies experienced modest immediate losses tied ......................

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