Hedge funds gain 1.85pc in August but correction due
HEDGE funds grew by 1.85 per cent on average in August, meaning the funds have now grown 17.3 per cent this year so far, according to data released yesterday.
But the data provider Hennessee said the gains may be the last investors see for a while, fuelling fears the hedge fund sector’s raging recovery that started in March is running out of steam and a correction is overdue.
Hennessee struck a cautious note, warning the growth is unsustainable. It also pointed out that the hedge fund gains in August paled in comparison to a much stronger 12.9 per cent rise in the financials sector of equity markets.
“Government spending continues to drive demand, while the private sector has been largely absent. This dynamic is not sustainable,” said Charles Gradante, Hennessee’s co-founder.
“With September being one of the worst months historically, we are cautious of a pull back in the markets.”
He warned fund managers are remaining cautiously positioned despite the recent gains, relying on selecting good quality individual stocks.
This is due to continuing fears the market has “gotten ahead of itself” and is due for a correction.
“We have seen a steady rise in US manufacturing levels over the past several months, which is certainly a positive sign,” he said.
“However, a lot of this is being driven by government stimulus and subsidies, such as the ‘cash-for-clunkers’ programme.”