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From Kirsten Bischoff, Opalesque New York:
Asset flows to long/short funds have slowed in 2010 as investors “appear to be shying away from strategies whose returns might be significantly affected by overall market turbulence,” determined a research report by Credit Suisse Asset Management. The fact is, investors expect absolute returns from their long/short equity managers. And as the decades-long bull market became the 2008 financial crisis, investors found out the hard way that many managers were making only limited use of their shorting capabilities.
But for Bill Martin, Chairman and CIO at Raging Capital, a five-year old, Princeton New Jersey-based firm with a little over $80m in assets, a strong short book meant the difference between his long/short fund simply surviving the financial crisis, and thriving in it.
The Raging Capital Fund has returned +29.1% annualized net returns for its investors since it was launched in April 2006. “Without our short book, we would have been out of the game,” says Martin of the market turmoil that gripped the markets in late 2008.
For Raging Capital, focused mainly on small- and mid-cap, US based stocks, the performance of its long book, which often takes a long-term approach to investing, suffered greatly during the fourth quarter of that year as these stocks saw tremendous swings from dislocations in market liquidity.
Ultimately, the team was right on its long positions, but their long-term vie...................... To view our full article Click here
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