Top investors, strategists take pummelling in sell-off

S&P 500 index has lost almost 8% in three-and-a-half weeks

By Svea Herbst-bayliss (Reuters)

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Published: Fri 17 Oct 2014, 11:08 PM

Last updated: Sat 4 Apr 2015, 4:52 AM

Some of Wall Street’s biggest names are licking their wounds as October lives up to its reputation as one of the market’s roughest months.

The Standard & Poor’s 500 index has now lost almost eight per cent in the past three-and-a-half weeks, wiping out almost all of the gains achieved earlier in 2014. What seemed like another good year for investors in US equities is now fraught with uncertainty, with $1.3 trillion in S&P companies’ market value disappearing. Add in the impact of an oil price slump plus a big surprise rally in US. Treasuries, and the risks of big investment losses have risen dramatically.

From top equity strategists to big hedge funds and mutual funds, the carnage has spared few. Morgan Stanley strategists said this week that their model portfolio through Monday had trailed the S&P by 3.6 percentage points due to bad bets on technology stocks, including GT Advanced Technologies, the Apple supplier that surprised investors with a bankruptcy filing last week.

Billionaire investor Carl Icahn, had indicated for some time that he was prepared for a stock market reversal but it is unclear whether he would have been fully hedged against a 27 per cent drop in the shares of online video company Netflix on Wednesday after it reported slower US growth. Icahn’s Icahn Enterprises owned 1.8 million shares at the end of the second quarter. He could not be immediately reached for comment.

The average US equity mutual fund through Tuesday was down 2.3 per cent on the year, according to Morningstar data, trailing the S&P, which is up a meager
0.8 per cent.

Meanwhile, leveraged ETFs, which try to double the performance of key averages, are doing worse — a popular leveraged bond ETF that bets on higher long-dated yields has lost 16 per cent in the last 20 days.

The Proshares Ultra S&P 500 fund — an ETF that looks to double the S&P’s performance — is down 14 per cent in 19 days.

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