Hedge Funds Going Long
With retail investors selling off their recent gains in equity markets, long/short equity funds are ideally positioned to profit in the short term from rallies and in the long term from price appreciation.
Institutional investors have taken note. In the third quarter, hedge funds raised nearly $1.1 billion in new capital.1 Many of these funds have been buying equities because they believe that the current market rally will continue.
Since the beginning of the fourth quarter, BHA analysts have profiled more than 400 institutional investors with an active interest in hedge funds. In this sampling, nearly 66 percent indicated an interest in long/short equity funds, continuing to make them the most popular search among hedge funds investors.
One such investor is a private high school’s endowment fund. It indicated an interest in reviewing technical, quantitative, or systematic long/short equity hedge funds with at least $500 million in assets under management. While the endowment is in the early stages of researching funds, it thinks there remains ample opportunity going forward.
The S&P has rallied more than 60 percent since its low on March 9, 2009. Hedge funds are going long because of the market’s dramatic rise. They are generally increasing their stakes because they see opportunities to make money again.
1 Bloomberg, “Hedge Funds Buying as Individuals Sell in Bull Signal (Update 3),” November 30, 2009.