Hedge Funds Frostbitten In January

Feb 8 2008 | 10:37am ET

When the January chill is in the air, hedge funds are usually heating up; not so this year. Last month was one of the worst-ever first months of the new year.

According to preliminary results from several indices, hedge funds declined between 1.8% and 3.6%.

Among the biggest losers were equity long/short funds and last year’s industry darling, emerging markets. The former dropped 4.1%, according to Hedge Fund Research, which registered an overall 1.8% decline for hedge funds, while the Dow Jones Hedge Fund Indexes recorded a much more precipitous 10.05% fall for the strategy. The latter lost 8.81%, according to BarclayHedge.

Event-driven funds also suffered last month, falling 1.8%, according to HFR, and 2.71%, according to Dow Jones.

Last month’s losses tarred some very big names in the industry, including Goldman Sachs’ brand-new stock picking hedge fund, which fell 6%. Both Farallon Capital Management and Third Point suffered a 3.6% decline, while Norway’s Concentric Capital’s European fund dropped 22%.

All six of the strategies tracked by Dow Jones were in the red last month. Distressed securities fell 4.09%, merger arbitrage 2.87%, equity-market neutral 1.79% and convertible arbitrage 1.6%.

Short-biased funds avoided the chill, no surprise as the Standard & Poor’s 500 fell 6.1%, returned 1.28% last month, according to BarclayHedge.


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