Hedge Funds Hit For 2.32% In August, Drop Below Par

Sep 9 2011 | 12:02pm ET

A tough August has hedge funds covered in red this year.

Hedge Fund Research's HFRI Fund Weighted Composite Index fell 2.32% last month, driving the benchmark into negative territory for the year. Eight months through 2011 and the index is down 1.22%.

Stock-heavy hedge funds led the decline, with equity hedge strategies losing an average of 4.11% (down 3.42% year-to-date), while the Standard & Poor's 500 Index lost almost 6%. Energy and basic materials funds shed 4.11% (down 5.37% YTD), as well, and technology and healthcare funds posted a loss of 3.37% (up 2.09% YTD). Quantitative directional funds dropped 1.73% (down 0.61% YTD) and equity market neutral funds 0.94% (up 0.06% YTD).

Emerging market funds did even worse, thanks to pitiful performance in Asia ex-Japan and Russia and Eastern Europe. The average emerging markets fund fell 4.7% on the month (down 4.55% YTD). But Russia and Eastern Europe funds plummeted an average of 10.3% in August (down 6.93% YTD) and Asia ex-Japan funds fell 6.22% (down 7.75% YTD).

Event-driven funds didn't have it much better, losing an average of 3.71% (down 0.92% YTD). Distressed and restructuring funds were especially hard-hit, falling 4.31% (down 0.48% YTD), with merger arbitrage funds shedding 1.08% (up 0.68% YTD).

Relative value funds lost 1.18% in August (up 1.92% YTD). Corporate fixed-income funds fell an average of 2.75% (up 1.59% YTD), while convertible arbitrage funds fell 2.39% (down 2.62% YTD) and yield alternatives funds 2.11% (up 3.34% YTD).

The month's few bright spots—and they were few enough—were provided by funds betting against the stock market and macro funds. Short-bias funds soared 6.94% last month to push themselves into the black for the year at 2.52%. The average macro fund gained 0.12% (down 0.3% YTD), while the average systematic diversified fund rose 0.94% (up 0.73% YTD).

Funds of hedge funds fell 2.07% on the month (down 1.92% YTD).


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Editor's Note