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July 16, 2006
Hedge Fund Returns in 2006
Hedge funds have seen a decline in their expected returns following heavy losses in May and June on stock market. It is expected that the average hedge fund returns will be little more than 9.5 percent in 2006. Until April, hedge fund industry was expecting 12 - 15 percent returns following the positive signs in the first quarter of 2006. The year 2005 also witnessed a slump, as the average return was around 7.5 percent. Concerns over rising inflation, higher interest rates and global economic slowdown made the stock prices fall. Since then the market has remained volatile.
Long/short equity hedge funds buy stocks they see as cheap and short sell those they think are expensive. Overall, they normally have more long positions than short and between 30 and 40 percent of their returns come from stock prices trending higher.
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