Morgan Stanley Notes Mean Reversion Hedge Fund Opportunity

Hedge fund investors are concerned about the high correlation between many hedge funds and the equity markets as a “rotation” has occurred between fund strategies, a report from Morgan Stanley Prime Brokerage observes, a copy of which was reviewed by ValueWalk.

Correlations with equity markets are typically a concern of mathematically driven hedge fund allocators who strive for protection of capital during crisis as well as strong absolute returns during good times.  The problem for sophisticated hedge fund investors has always been that many funds that have exhibited a relative lack of correlation to the...