WEST PALM BEACH, FL (www.hedgeco.net) – The recent attacks on London\u00c3\u00af\u00c2\u00bf\u00c2\u00bds transportation system may not cause serious setbacks to the hedge fund establishments, according to experts. While the marketsexperienced losses last week resulting from such attacks, analysts don\u00c3\u00af\u00c2\u00bf\u00c2\u00bdt think the attacks will create further problems big enough to trigger a collapse. While volatility and equity volumes soared onthe day of the attacks, such problems will be well managed and no lasting repercussions are expected.<\/p>\n
Andrew McCaffery, chief executive officer at Attica Alternative Investments noted that, “Some hedge funds might find it difficult to manage risk if there are liquidity problems.” He added that, “It’s unlikely that today’s events will take out a hedge fund … Market dislocation will create opportunities as much as problems for risk management.”<\/p>\n
Long\/short equity hedge funds may have suffered more from the market declines on Thursday than other strategies because about 40 percent of their returns are derived from equity transactions. Derek Stewart, a director of Mellon Global Alternative Investments said, “A couple of (long\/short equity) managers might be down on the day.” He however added, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdWe don’t think it has any long-term implications … It’s possible the market will be back to normal within a couple of days … We don’t see a major problem.”<\/p>\n
Terrorists have always aimed at disrupting the global financial system, but the markets have always bounced back after each terrorist attack. As with such cases, rumors run high; in fact some hedge funds began selling on rumors, following the London attacks, but those managers have not liquidated their long equity positions.<\/p>\n
Last week major stock indices lost about 2 percent in Europe, and less than 0.5 percent for the U.S. equity markets. Chris Fawcett, a partner at hedge fund firm Fauchier Partners noted, “Equities are down … but the fall is pretty small. Most hedge funds would cater for moves several times this magnitude. Adding, “The analogy is Madrid and not New York.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd There is also a reassurance message from the Bank of England when it decided to keep benchmark interest rates unchanged at 4.75 percent on Thursday following the terrorist attacks.<\/p>\n
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net<\/p>\n
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