Short-Term Bets Rule In Volatile Europe

Oct 4 2011 | 3:06am ET

Hedge funds that have given up trying to make sense of Europe's market volatility are besting those seeking a sensible narrative.

Long-term bets are killing hedge funds seeking to invest based on the continent's debt crisis. But those that are nimbly jumping into and out of the markets, such as relative value traders, are doing quite well, Reuters reports.

"The smart money is not trying to predict the endgame," Man Group's Luke Ellis said. "If you hang on, you can get a volatile position, your risk management stops you and you get a loss."

"The smart money is using the swings and roundabouts of political debate to get into and out of trades."

With 3% to 4% daily swings in the market now commonplace, "if you take a long-term bet you could be wrong for a very long time," AXA Investment Managers fund of hedge funds chief Francisco Arcilla told Reuters, and "tolerance to be wrong for a very long time isn't there."

"If there isn't enough stability and persistence within the market itself it's very difficult to invest or trade or to make consistent gains," Viognier Capital Management's Andrew Mann added. "You find yourself a hero for three days and then on the fourth day it's back to square one."


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