Hedge Funds Down 3.36% In August, Replication Index Shows

Sep 6 2011 | 4:00am ET

Hedge funds took a big hit in August, battered by tremendous market volatility and declining stocks, according to Credit Suisse's suite of hedge fund replication indices.

The average hedge fund lost 3.36% last month, the Credit Suisse Liquid Alternative Beta Index shows. The benchmark is now down 0.98% on the year.

"The [Standard & Poor's] downgrade of the U.S. credit rating caused a broad market sell-off that negatively impacted the distressed equity sector," Credit Suisse's Jordan Drachman said. That hit event-driven funds particularly hard; the Credit Suisse Event Driven Liquid Index dropped 4.62% in August, erasing its year-to-date gains and leaving it down 1.95% on the year.

Long/short equity hedge funds dropped an average of 3.68% (down 0.38% year-to-date) and global strategies funds 2.69% (down 0.64% YTD). Merger arbitrage funds lost 0.77% (up 2.89% YTD), while managed futures funds managed a 0.35% increase (down 1.99% YTD).

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