LONDON, Sept 11 Reuters Trendfollowing hedge funds took a hit from their bets on the New Zealand dollar and Japanese stocks and bonds in August, when global markets were rattled by extreme volatility, according to Societe Generale data seen by Reuters.

These funds finished August with long positions in Japanese government debt, U.S. equities and the Australian and New Zealand dollars, SocGen data showed.

Some of the asset classes now favoured by the trend hedge funds that use algorithms to catch and ride price movements have proven lossmaking this year, according to the data.

However, it was not clear whether they held bullish or bearish positions when they incurred the losses.

August39;s worst bets for hedge funds were in 10year Japanese government bonds , the Nikkei 225, the New Zealand dollar as well as German and Italian stock markets, the SocGen note said.

The Mexican peso , the British pound , the euro , blended gasoline and U.S. 2year Treasuries have all been losing trades this year so far, but in August they proved profitable.

The sudden reversal of crowded equity and foreign exchange trades last month was sparked by the unwinding of massive carry trades in which investors had borrowed lowyielding currencies like the Japanese yen to buy higheryielding assets that in turn generated a vicious feedback loop of equity price drops, volatility and hedge fund selling.

The market ruction was shortlived and world stocks returned to record highs later in that…