LONDON, Sept 11 (Askume) – Trend-following hedge funds increased bets on the New Zealand dollar and Japanese stocks and bonds in August, when global markets were gripped by extreme volatility, according to Societe Generale data seen by Askume.
SocGen data shows that as of August, the fund held long positions in Japanese government debt, US stocks and the Australian and New Zealand dollars.
Data shows that some asset classes currently favoured by hedge funds, which use algorithms to catch and exploit trends in price movements, have proven unprofitable this year.
However, when they take losses, it is not clear whether they are bullish or bearish.
The Societe Generale stated that,The worst hedge fund bets in August were 10-year Japanese government bonds, the Nikkei 225, (.FTMIB), Italian stocks (.GDAXI) , the New Zealand dollar and Germany (.N225) .
The Mexican peso, sterling, the euro, blended gasoline and US two-year Treasuries were all in the red so far this year, but turned into the black in August.
The sudden reversal in equity and currency trading last month was largely due to the closure of carry trades, in which investors borrow low-yielding currencies such as the yen to buy higher-yielding assets, leading to a catastrophic drop in stock markets.
The market turmoil was short-lived, with world stock markets again reaching record highs at the end of the month.
It has been tough for some trend followers whose performance declined by double digits in August, including funds from Eclipse Capital Management, Drury Capital and SEB Asset Management, which saw their performance drop by more than 10%, the report said.
Funds from Drury Capital Management and SEB Asset Management rose 3.45% and 0.57%, respectively, by the end of August, according to Societe Generale.
Hedge funds that trade short-term recorded their best performance in August. That includes money from Revolution Capital Management, Altiq and Crabel Capital Management, bank data show. These companies performed well in August, with growth ranging from 3.8% to 4.5%, according to Societe Generale.
Altiq and SEB Asset Management declined to comment. Other funds did not immediately respond.
