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Alternative Market Briefing

Market timing hedge fund strategies backfire on investors

Friday, February 18, 2011

From Kirsten Bischoff, Opalesque New York:

Market timing does not work in hedge fund investing. A balanced portfolio with multiple strategy exposures is the best way to manage hedge fund investments, is the conclusion that can be reached by research announced Thursday by TrimTabs.

Trimtabs studied data from Informa Investment Solutions’ large institutional separate account database to see how asset flows compared to the performance of the strategies investors have shown preference to, and concluded that recently popular strategies have trailed in performance to out of favor strategies.

“The least popular strategies in one quarter tended to outperform the following quarter. For example, investors in separate accounts piled into US Fixed income and sold US equity funds in the third quarter of 2010. These investors likely got smacked by the recent sell-off in US bonds and missed the huge rally in US equities,” says TrimTabs Executive Vice President, Vincent Deluard, CFA.

Investors flood managed futures only to start 2011 performance in the red A good example of this phenomenon is managed futures. The strategy gained industry-wide praise when CTAs outperformed in 2008, delivering +14.09% (BarclayHedge CTA Index). However, just as their assets beg......................

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