A temporary ban on some short sales - and another reversal of the long commodity/short financial trade - strips equity funds of their luster
By Pete Gallo
If October hadn't been so brutal, the month of September could have well gone down as the worst month in the history of long/short equity strategies. During that 30-day period, Lehman Brothers failed, credit markets froze, the U.S. Securities and Exchange Commission temporarily banned funds from taking on additional short positions on financial stocks - and the popular long commodity/short financial trade inverted, only to reverse again.
"For the hedge fund industry, September and early October was a period of almost unprecedented risk, given the broad scope and speed of the equity market's decline across all sectors, not to mention the scale of the underlying problem - a credit cloud big enough to potentially bankrupt economies the size of Belgium," says John Trammell, president of...