Hedge Fund watch: The biggest macro hedge funds difficulties can be traced back to central-bank intervention and declining trading volume. Louis Bacon decided to return $2 billion, or about 25% of the hedge funds he manages, to investors after returning just 1.6% this year, a letter yesterday showed. Hedge fund manager Ray Dalio of Bridgewater Associates LP, the world’s largest hedge fund, lost 2 percent in his $54 billion macro fund through July 20. Uk hedge hunk Alan Howard of Brevan Howard Asset Management LLP has lost 1.3 percent in his Master Fund. “The bulk of rallies occur at turning points on low trading volume. Subsequent momentum and trends are much less rewarding,” Burton quotes Bacon’s letter revealing the decision. “diosyncratic opportunities, particularly in liquid markets where volume can be exploited, are becoming oases in an investment desert.
European Central Bank, part two of this week in which traders hope for another hit of monetary stimulus. The market over the last two weeks has priced in the apparently soothing effects of more sovereign-bond purchases, driving yields on battered Spanish and Italian bonds down to outrageous levels, as opposed to near-bailout ones. Of course, this presumes that such purchases will actually take place. The “Doing nothing is not an option” brigades are out in full force, with Societe Generale’s chief European economist warning of a “full-blown crisis” if ECB chief Mario Draghi stands pat. (Certainly it will be a full-blown crisis for SocGen.) “The potential for disappointment over today’s ECB meeting is considerable, its president Mario Draghi having awakened hopes of strong monetary impetus,” write Commerzbank’s commodity strategists.”
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