According to the latest press release by Credit Suisse Index Co., The Dow Jones Credit Suisse Hedge Fund Index had an increase of 0.69% in July with six sectors out of ten delivering positive returns. The managed futures had the best performance of the July 2011, with a gain of 4.03%.
The Eurekahedge Hedge Fund Index rose in July also, it had an increase of 0.62%. While Asian index grew by 1.10%, Latin American index went down by 0.70%. North American index was up 0.16%. Overall, Global equity markets fell in July. MSCI World (stock market index of over 6,000 world’ stocks) was down 2.59%.
Hedge funds usually outperform the markets when stock prices are declining. According to the Dow Jones Credit Suisse Hedge fund index, hedge funds outperformed global markets by 3.28% in July (0.69%+2.59%). According to the Eurokahedge Hedge Fund Index hedge funds outperformed global markets by 3.21%. This is why investors like hedge funds.
The Ban on short selling extended:
Financial markets authorities in Europe extended the ban on short selling. The ban on short selling was brought on August 12 to confine the volatility in the markets. The ban originally was introduced for a period of 15 days in 4 European countries and it only concerned the financial stocks. Italian newspaper il Messaggero, without giving any source, said before the extension that the ban might be extended.
Short selling is a bet that a stock’s price will fall. The investor borrows the securities to sell, hoping that they can buy these securities at a lower price in the future to replace them, therefore making a profit.
Spanish financial authority confirmed before the extension that all countries concerned have begun discussions on whether to extend the ban or lift it. CEO of Credit Agricole, Jean-Paul Chifflet, pleaded for a prolongation of the ban. He clearly didn’t want to go down without a fight.
Market commentators questioned whether such bans will work, saying that the traders always find different ways around such bans. The recent increase in stock prices shows that bans work at least in the short-run.