Why October is a scary month for hedge funds

Not because of Halloween, but a ghoulish combination of central bank noises, retail buying of credit risk and Refco.

October is likely to prove a terrible month for hedge fund managers across asset classes because of sudden changes in the way various risks correlate, says William Reeves, principal at UK-based BlueCrest Capital Management, an alternative investment platform partly owned by Man Group. Reeves manages the firm's flagship relative-value fixed income fund, a low-return, low-volatility product popular with many institutional investors, and believes the Street's misunderstanding of correlation risk is setting investors up for losses.

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