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β οΈ Investors Save Money: Equity Hedge Funds Lose Capital
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After years of chronically poor returns, major clients are withdrawing nearly $150 billion in assets from a long-term strategy that has produced several famous traders. Investors are tired of the inability of long-short equity fans to profit in bull markets and protect themselves during declines.
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To recap, going "Long-Short" is an investment strategy that involves buying stocks that are expected to rise while shorting stocks that are expected to fall. "Long-short equity" allows you to minimize risks by obtaining profit from shares that analysts define as undervalued and overvalued.
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The strategy generated double-digit returns during the bull market of the 1990s, with many funds then profiting by taking positions in grossly overvalued dot-com stocks during the subsequent downturn. During the global financial crisis, funds such as Lansdowne Partners made millions betting against doomed British lender Northern Rock.
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Unfortunately, over the past 5-7 years it has failed to adapt to markets largely dominated by central banks. Famous funds such as London's Pelham Capital or the family fund Adelphi Capital, Chase Coleman's Tiger Global and Lee Ainslie's Maverick Capital have suffered from her ineffective ideas.
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According to Financial Times analysts, an investor who 10 years ago invested $100 in a hedge fund with a Long-short equity strategy would now receive no more than $160-170. With a similar investment, for example, in the Vanguard S&P500 index with dividend reinvestment, one could get at least $300 in "net" profit.
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So, without an effective medium-term strategy for making money in the current market, you cannot survive now.
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How do you hedge risks? Share your experience!
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Profits to yβall!