Hedge funds run with the bulls but steer clear of the bears

Credit Suisse sees greater hedge fund correlation with market upturns than downturns while range of asset classes will preserve capital when markets fall

Hedge funds are more correlated with markets in bull runs and de-correlated in downturns, research from Credit Suisse has claimed. A comparison of the Credit Suisse/Tremont Broad Benchmark hedge fund index (HEDG) and the MSCI World shows the 12-month rolling correlation between the two has dropped from its peak of 0.97 in June 2006 to 0.61 in June 2008. The report showed that during times of market stress, sharp declines from HEDG's previous peak levels of positive correlation with MSCI World demonstrated the ability to de-correlate from broad equity indices. Between July 2007 and Jun...