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It seems that yet another global credit crisis —this time in Europe —is causing the kind of herd behavior that makes it hard for hedge funds to identify stocks and other securities that will deliver return above and beyond that of the market.Goldman Sachs noted in a report to clients—many of them hedge funds—that correlations among individual stocks have increased significantly since March, meaning they move in lockstep with one another. Goldman expects expect that to continue, making it even harder for hedge funds to reverse this trend in the second half.“We continue to expect a slow recovery in the stock-picking environment as macro growth concerns and event risks dominate the investment environment,” wrote Goldman’s Stuart Kaiser, in a note.Funds from notable hedge fund managers such asJohn Paulson, Daniel Loeb and David Einhorn underperformed the market in the first half.
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