Riding the volatility

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CDS positions saved financial portfolios in August, but there's little agreement on the road from here

By Julie Dalla Costa

Rising mortgage defaults, a credit crunch that scorched everything from jumbo mortgages to commercial paper, and uncertainty around the Federal Reserve Board's zeal to trim rates made for a chaotic August, at least for hedge fund managers focused on financials.

Much to their credit, many funds with a financial focus weathered the storm well. But with a huge overhang of leveraged buy-out debt, a subprime mortgage crisis that is still claiming