(LONDON Reuters) - A stock market rally has helped hedge funds avoid a nightmare prospect of another year of losses, but their performance raises questions about just how much value managers add through their own skills. Fund performance over the past year has been closely correlated with equity market gains, suggesting investors may not have got the value-added they pay for in fees.

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(Reuters) - WellPoint Inc (WLP.N) and Aetna Inc (AET.N) raised their profit forecasts for the year as members avoided doctor visits or delayed care to save money, and the large U.S. health insurers should see an improved political environment for their business under the new Congress. Both companies reported higher-than-expected quarterly profits on Wednesday, saying they benefited from having to pay out less in medical costs.

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(Reuters) - The four largest U.S. banks face potential losses of $26 billion over the next several years from their exposure to private-label mortgages and potential losses from delinquency, analysts at Goldman Sachs said. Private-label mortgages are those offered by private institutions, as against those by government-backed agencies.

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(Reuters) - Wall Street rose firmly at the open on Tuesday as investors anticipated huge gains by Republicans in the midterm elections, an outcome that is likely to boost stocks and further fuel risk appetite. Voters could sweep Democrats from power in Congress, halting President Barack Obama's legislative agenda. Polls indicated Republicans will gain control of the U.S. House of Representatives, while Democrats retain control of the Senate.

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(Reuters) - BP offered investors tentative signs of recovery on Tuesday, with a modest rise in underlying profits, as it increased its estimate of the likely cost of its Gulf of Mexico oil spill to $40 billion. Stripping out one-off costs, including an additional $7.7 billion charge related to capping the blown-out well, BP said underlying results rose 18 percent, compared to the same period in 2009, to $5.53 billion.

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(Reuters) - Pfizer Inc reported sales far below Wall Street forecasts on Tuesday, hurt by a stronger dollar, generic competition internationally for cholesterol drug Lipitor and weak revenue in emerging markets. Pfizer, the last of the large U.S. drugmakers to report third-quarter earnings, followed the example of most rivals with higher-than-expected profits -- largely resulting from cost cuts -- but disappointing sales.

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(Reuters) - General Motors plans to sell just over $13 billion of shares in its IPO, people familiar with the matter said, cutting the U.S. government's stake while opening the door for investment by overseas state-backed investors. GM will file the terms in an updated prospectus for its initial public offering with the U.S. Securities and Exchange Commission on Tuesday, the sources said.

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(Reuters) - In a week of great uncertainty, with the announcement of a massive Federal Reserve buying program widely expected and the jobs report for October due, options traders have become more defensive as they await the unknown. The most familiar measure of investor anxiety, the CBOE Volatility Index .VIX, has risen for six straight days, but actual volatility in the S&P 500 index .SPX is at its lowest since April.

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(Reuters) - The U.S. Federal Reserve opens a two-day meeting on Tuesday that is expected to conclude with a decision to pump hundreds of billions of dollars into the economy to stir the tepid recovery out of its doldrums. Policymakers are disappointed with the economy's sluggishness. With an unemployment rate stuck at 9.6 percent and core inflation running at lows not seen since the 1960s, some worry about outright deflation.

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(Reuters) - Morgan Stanley (MS.N) is looking to revive its fixed income, currencies and credit business to boost its market share, but the plan is not likely to result in an immediate boost to earnings, according to Nomura Securities analyst Glenn Schorr. "We think management has a credible plan to rebuild the trading franchise," wrote Schorr, after meeting with Morgan Stanley executives. But he added that the plan will take time and returns are likely to remain sluggish in the near term so Nomura remains neutral on the stock.

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