Hedge Funds Loading Up on Darling Stocks Got a Rude Awakening
- Record unwind in momentum shares hurt funds chasing winners
- Volatility in styles like size, value was headache to quants
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The trend is your friend until it isn’t. That’s a lesson hedge funds learned the hard way during this week’s market turmoil.
Promising news on Covid-19 vaccines set off a violent rotation among stocks Monday and Tuesday that went against professional money managers. As a result, funds that make both bullish and bearish equity bets based on business fundamentals saw their alpha -- the extra return above an equity benchmark -- fall the most since March, according to data compiled by Goldman Sachs Group Inc.’s prime-brokerage unit.