On the rocks - US insolvency court decisions and their impact on the UK hedge fund community

legal focus

One of the selling points of the hedge fund is that it can appreciate in value even in a falling market.

By using a range of investment tools such as short sales and derivatives, including futures, options and credit default swaps, managers say they can bid against the indices and make money even in a downturn.

This may be true in normal market conditions, but recent experience shows that when the entire market is falling sharply, even hedge funds can struggle to make money.

This should not be

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