![]() The crux of the strategy involves buying up shares in companies slated for inclusion in an index and selling short the companies about to get booted. "We know people who've gotten smashed in it." "Most people were wrong the same the way," a hedge fund manager told Insider. "All of index rebal is down," an index-rebalance portfolio manager said. Traders wagering on the planned June 27 recalibration of the FTSE Russell indexes, including the Russell 3000 that tracks the 3,000 largest US stocks by market capitalization, have been especially hard-hit, people involved in the strategy said. Instead, the uber-popular index-arbitrage strategy has turned into a bloodbath, and portfolio managers that crowded into the trade are staring down steep losses, according to industry sources. June is supposed to be the mecca for index-rebalance traders, the Wall Street investors who make bets based on stocks that get added or deleted to popular indexes like the S&P 500 and Russell 3000. ![]() Traders that wager on changes to passive indexes have suffered substantial losses.The overcrowded strategy got torched this month after trades anticipating the Russell 3000 recomposition went awry.Index-rebalance trading soared has in popularity at funds like Millennium, ExodusPoint, and Point72.Paid non-client promotion: In some cases, we receive a commission from our partners. Our experts answer readers' investing questions and write unbiased product reviews ( here's how we assess investing products). Account icon An icon in the shape of a person's head and shoulders.
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