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Alternative Market Briefing

Veteran manager of U.S. equity long/short hedge fund says history may be repeating itself

Thursday, October 25, 2018

Art Holly
B. G., Opalesque Geneva:

According to Arthur (Art) Holly, who last year launched Blue Wave Global Investors LP, a U.S. equity long/short hedge fund, some of what is happening in the financial markets feels like 2007 all over again.

When the Dow Jones Industrial Average, the Nasdaq Composite and the S&P 500 dropped by several percent earlier in October, Blue Wave went down about 184 basis points at its lowest.

The reasons why the market went down so sharply are due to "everything under the sun," he tells Opalesque: "China is slowing down, trade tariffs issues, a president with a very different managerial style which causes uncertainty, the Fed raising interest rates, a bond market that has got clobbered recently, credit spreads that are very tight and starting to widen, junk bond issuance that is almost non-existent because everybody is using the leverage loan market, troubles in the EU with respect to Italy, and finally the internals of the market have been falling apart. Parts of this story feel like 2007 all over again."

The fund has been running a flat exposure since the first week of the month. Its dynamic hedging model allows the team to take net exposures from 55-60% down to zero within 12 hours when markets distribute lower and seek value at lower price levels. The model can also get back to the previous levels of exposure quickly when markets distribute higher, he continues. "That's one part of our secret sauce. The other part of the secr......................

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