Hedge Fund Reader : Hedge Funds helped by Credit Market

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July 27, 2005

Hedge Funds helped by Credit Market

Improvement in Credit Markets has helped Hedge Funds somewhat after a dismal show in the first half of 2005. Nader Tavakoli, founder of EagleRock Capital Management, a credit hedge fund firm based in New York, commented that while there was trouble for some hedge funds especially convertible funds, some amount of stability has been achieved now. He added that there have been no major defaults and a conducive credit environment has been set up. Hedge funds are loosely regulated and have been seen as good investment options compared to mutual funds. They are able to employ certain strategies which enable them to make profits both in raising as well as falling markets. However the industry saw a spate of redemptions following the downgrading of bonds of two auto firms. The blow was most severe for convertible arbitrage funds. Despite all this, the funds still managed to outperform equity markets though they did not meet investor expectations. IHT.com reports:

“The CSFB/Tremont hedge fund index, which tracks more than 400 managers, climbed 1.31 percent in June, giving it a gain of 1.34 percent for the first six months of the year, CSFB/Tremont said Friday.”

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July 27, 2005 in Research | Permalink