August was a tricky month for long/short equity managers. Funds that were net long got hit when quantitative funds deleveraged early in the month. Funds that cut leverage early in August or ended the month net short missed out on the rally that occurred after the Federal Reserve lowered its discount borrowing rate for banks.
The S&P 500 ended the month up 1.3%, but not before equity markets experienced their highest level of volatility in four years. The CBOE's volatility index, which tracks the S&P, hit a top of 30.8 on August 16.
U.S. equity long/short funds coped better on