Hedge funds have been caught flatfooted as the stock market’s volatility and a ban on short selling has made it more difficult to predict swings, the New York Times reports. Many funds, which generally have flourished amid market turbulence, are reporting their worst year ever, fueling speculation that some of the highest rollers might not survive.
With funds down as much as 30% for the year, the appetite for risk has waned. “With this kind of fear you can’t do anything,” said one hedge-fund investor who pulled out of Morgan Stanley only to see the stock rebound from a low of $12 to $27. “You never have heroes when you get these kinds of violent moves. The heroes only come out when the stock is down and stays down.”