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Managed futures hedge funds hit by volatility -Lipper

Date: Wednesday, November 25, 2009
Author: Laurence Fletcher, Reuters.com

* Managed futures funds down 1.41 pct in October

* Down 0.97 pct year-to-date, some big names struggle

* Best-performing strategy of 2008


LONDON, Nov 24 (Reuters) - Recent volatility in global stock markets has compounded problems for the managed futures hedge funds that did so well last year, and left them struggling while the rest of the industry prospers, Lipper data showed.

Managed futures funds, the top-performers in 2008, tend to make money by latching onto sustained rises or falls in global futures markets, but can be hurt by short-term reversals. They have suffered this year from a lack of clear trends in markets.

Data from Lipper on Tuesday shows such funds, also known as CTAs (commodity trading advisers), lost 1.41 percent on average in October, hit by a sell-off in equity markets in the second half of the month and a spike in volatility.

The FTSE 100 .FTSE, which is up by more than 50 percent since the start of the year, fell 4.5 percent between Oct. 19 and 30 on fears an early withdrawal of government stimulus could harm a fledgling economic recovery.

Managed futures funds are down 0.97 percent on average over the year to date, the Lipper data showed, while in contrast, figures from Credit Suisse/Tremont show the average hedge fund is up 15.11 percent so far this year, helped by strong gains in most asset classes. Lipper's data shows some well-known managed futures funds continue to show losses for the year. Winton Diversified Programme is down 7.29 percent, while Aspect Diversified USD has lost 14.02 percent.

Based on statements issued to the market, Man Group's (EMG.L) flagship strategy AHL Diversified Futures strategy is down 10.6 percent since Dec. 29, 2008, despite a recent pick-up in performance.

"Managers struggled in the second half of October on erratic price swings and trend reversals as mixed macro readings pointed to the fragility of the economic recovery," Lipper said in a statement.

Last year managed futures were one of the few bright spots in a loss-making industry, gaining from falls in equity markets and long-lasting trends in the oil price. Lipper is a Thomson Reuters company. (To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here) (Reporting by Laurence Fletcher, editing by Will Waterman) ((laurence.fletcher@thomsonreuters.com; +44 20 7542 7729; Reuters Messaging: laurence.fletcher.reuters.com@reuters.net))