FOHFs maintain high equity correlations via ETFs


Funds of hedge funds have struggled in long/short equity strategies as correlation with equities remains high among a number of managers, according to a new report from Standard & Poor’s.

Permal found that the correlation among the S&P 500 index’s constituents last reached this level in 1987 prior to the market’s freefall, according to S&P. The current level of correlation began growing in middle of 2008 and has persisted for longer than at any time since the last 30 years. 

Driving this trend is the growing popularity of exchange traded funds (ETFs), which is an area where managers have