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View the article online at http://citywire.co.uk/wealth-manager/article/a646487

Hedge funds caught out as short selling costs them dear

by Sarah Miloudi on Dec 18, 2012 at 13:06

Hedge funds have been caught out trying to predict crashing stocks, losing 16% through short selling strategies year to date.

According to a fresh analysis, short selling has proved a losing strategy, clocking up the biggest losses of 13 monitored by the EDHEC-Risk Institute.

Short selling strategies shed 1.57% in November alone, according to the analysis, and aside from global commodity trading strategies, which lost 0.08%, no other strategy lost hedge funds money during November.

Despite a number of investors looking to hedge fund trends as a canny way to root out ideas, it is not the first time traders have landed on the wrong side of short trades.

A study published by EDHEC in August found short selling strategies had made nothing.

Year to date, the best strategy was distressed securities, which notched up a 10.7% cumulative return, followed by relative value, which returned just over 8%. 

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