Short-Bias Funds Enjoy Renewed Interest
Short-bias fund managers are enjoying a renewed surge in investor interest following a lengthy stretch during which economic optimism and performance made the strategy decline in popularity.
According to Hedge Fund Research, the HFRX Short Bias Index is down nearly 20 percent for the year, but it was the best performing index over the past month: it was up nearly 4 percent. Sustained outperformance in world markets, coupled with an overall optimism among investors, has pushed up major world equity indexes during the past ten months. However, as more and more difficult economic data persist in GDP growth rates and unemployment numbers, it appears that short-bias managers may be uniquely situated to benefit from a market correction that reveals the instability and problems that continue to disrupt world economies.
During the past few weeks, several institutional and retail investors have expressed an interest in short-bias fund strategies as a hedge in the event that the current bull run is short lived and unsubstantiated. The CEO of a fund of hedge funds located in the Western United States is currently searching for excellent short-bias managers that were able to outperform in 2008 and preserve capital in 2009.
The HFRX Short Bias Index’s performance provides evidence for why many investors have begun to search for funds that are directionally positioned to protect against any downturn in the markets. Brighton House analysts will continue to monitor this trend closely in the coming quarters to ascertain if fund managers and investors that are fearful of an economic pullback will be proved justified.