Following news of the terrorist bombings in London , hedge fund managers jumped into the financial fray, placing bets on vulnerable sectors such as retail, travel and transportation. However, the quick recovery of the markets may have negated the efficacy of short-selling, even by the end of the day, CNN/Money reports.

Treasuries and Swiss francs were also popular among hedge funds managers, while others closed out their short positions and gravitated towards sector-specific stocks such as insurance companies. With the amount of volatility and uncertainty created by such situations, managers don't want to react too hastily and make drastic changes to their positions, said Forrest Fontana, who manages the equity hedge fund Fontana Capital.

"What we were mostly doing is refocusing on core names and trying not to add many new positions," Fontana said. "When there is a lot of sudden movement, you don't want to overread or overreact."

Fontana did put his money on insurer AIG, because of positive post-Spitzer news and a healthy jump in earnings. He explained that managers debate whether the insurance sector will go up or down following terrorism acts, but there are other factors that make the company a good buy.

The flight to safety represented by activity in buying Treasuries and Swiss francs may be short-lived, said Barbara Marcin, portfolio manager for the Gabelli Blue Chip Value Fund. "Treasuries definitely jumped up, but I wonder if they will even hold onto the gains today," she speculated.

The sector effects that might be felt from the terrorism are likely to be ephemeral, with one hedge fund manager predicting that hits to retail and travel in Great Britain will probably dissipate within a month.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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