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From Kirsten Bischoff, Opalesque New York:
"Absolute return" strategy was a phrase that hedge funds sold to investors in the bull market years, and then shied away from as "mis-marketing" when the bottom fell out of the financial markets in 2007/2008. Since then, there has been a slow and steady return to using this phrase when discussing hedge funds.
But with the pervasive sense of forced optimism currently being pushed through the financial markets, mixed with deep apprehension about the way things will actually go when the Fed withdraws support, how many funds are making absolute returns? And how many continue to simply strive to outperform a market benchmark?
"The concept behind hedge funds is that you are hedged, and therefore you shouldn't be subject to market movement and erratic performance, and yet in 2008 what you saw was most funds dropping significantly," Paul Cantor, CFA, Co-Founder of Hercules Trading Fund, LLC told Opalesque. "They could have outperformed the market and only been down 20% but, they did not perform absolutely, which was always my perception of what a hedge fund is supposed to do."
The frustration level for managers who deliver absolute returns is often palpable when they discuss funds and strategies that lost -20% or -30% in 2008. Although hedge fund fraud and liquidity issues took major swipes at the industry's reputation, the poor performance of 2008 across the board alienated a lot of current and future hedge f...................... To view our full article Click here
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