High-Flyers Stumble, Short-Sellers Rally In Nov.

Dec 18 2007 | 12:00pm ET

Worldwide market troubles led to a rough month for the year’s best performing strategies in November. According to the Credit Suisse Index Co., the two strongest strategies year-to-date fared the worst last month.

Event-driven multi-strategy funds shed an average of 1.94% in November, leaving it up 16.24% on the year. Emerging markets, which have led the way for much of the year—and which enjoyed the best October of any strategy tracked by CS—dropped 1.85%, but remains the best-performing strategy of 2007 at 18.7% year-to-date.

Overall, the Credit Suisse/Tremont Hedge Fund Index declined by 1.21% last month; it is up 12.04% year-to-date.

“In November, the U.S. continued to show weakness in everything from personal spending and income to construction spending,” CS Index Co. President Oliver Schupp said. “Housing prices in the U.K. fell for the third month in a row, and consumer confidence fell to its lowest level since February.”

With the stock market taking a tumble—the Standard & Poor’s 500 Index lost more than 4% in November, with the Dow Jones World Index down almost 5%—the only two strategies in the black in the CS index were dedicated short-bias and equity-market neutral. The former enjoyed an eye-popping monthly return of 10.31%, pulling it out of the red for the year and leaving it up 5.97% in 2007. The latter returned a much more modest 0.56%, and is up 8.74% year-to-date.

But there were many more losers than winners. Long/short equity fell 1.71% last month (up 13.18% YTD). Event-driven (down 1.68% in November, up 12.84% YTD) and convertible arbitrage (down 1.48%, up 5.59% YTD) also suffered more than most. Other losers included distressed funds (down 1.3%, up 8.29% YTD) and multi-strategy offerings (down 1.14%, up 10.44% YTD).

The Credit Suisse/Tremont Blue Chip Investable Index fell by 1.17%. It is up 7.11% year-to-date.


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