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Komfie Manalo, Opalesque Asia: With the UK deciding to leave the EU, new data are coming in is showing that hedge funds were hurt by the Brexit as stock sell-off hit them harder on a relative basis, research from Morgan Stanley said.
Authors of the study John Schlegel, Annie McNerney and Vasileios Prassas of Morgan Stanley’s prime brokerage unit said that hedge funds’ long exposure in North America and Europe "fell faster than the market and faster than shorts on Friday." They added that the industry’s losses were outpacing other major stock witnessed a day after the Brexit vote.
Hedge fund long exposure in Europe fell -9.7% on Friday while long exposure in the U.S. was -4.6% and in Asia down -3.2%. In comparison, most major large-cap indexes underperformed much less, with the exception of Japanese stocks. The S&P 500 index fell -3.59%, the FTSE 100 declined -3.15%, Nikkei 225 dropped -7.92% on the said day.
The reverberations of the vote will be heard around the world. Morgan Stanley’s Chief European Economist, Elga Bartsch, said the leave would likely trigger a downturn, if not outright recession in Europe, and resurrect concerns about a euro break-up.
"Depending on how Europe responds to a vote to leave, the financial stress expected in the UK could spill over into the euro area. In particular, if concerns about eur...................... To view our full article Click here
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