When the world started to melt
Asian banks: Now comes the real crisis
Asian research: Worth the paper it's printed on?
Country Risk December 1997: It could be worse
Global Economic Projections: Overall Rankings
According to their fans, hedge funds fared best in the October/November turmoil in emerging markets. Hedge funds, traditionally risk-averse, can steady their returns in volatile times. They tend to run offsetting long and short positions designed to profit from pricing anomalies and low-risk arbitrage.
Funds such as unit trusts and mutual funds, which can run only long positions, naturally fared worse as the markets dived. Some other open-ended, long-only funds suffered huge redemptions as investors fled the most volatile markets, especially south-east Asia. "There's a limit to what you can do," says a beleaguered long-only fund manager. "You can raise cash to maximum limits and head for markets that have fallen already." Another reasonably successful long-only manager relies on "good stock-picking and picking non-correlated countries". But with global contagion, and an exodus of US investors from emerging-market mutual funds, earning a positive return is increasingly difficult. In the meantime, hedge funds have been able to sell futures, borrow stocks and write index swaps with investment banks.