Hedge funds are off to the worst start in more than 20 years after posting their third straight down month in August.
The Hennessee Hedge Fund Index is down 4.09% year-to-date, after dropping another 0.72% last month. The index has enjoyed positive returns in just three months this year after beginning 2008 with an inauspicious 2.88% drop in January.
“This is the worst start to a year for hedge funds since the beginning of the Hennessee Hedge Fund Index in 1987,” Hennessee Group co-founder Charles Gradante said.
Both global macro and equity long/short funds continued their slide in August, with the former slipping 2.27% (down 7.22% year-to-date) and the latter down 0.22% (down 3.2% YTD). Fifteen of the 23 substrategies tracked by Hennessee were in the red last month, actually an improvement on the year as a whole, as only three of the substrategies are in the black year-to-date.
The worst performers in August included emerging markets—last year’s best performing strategy fell another 3.31% on the month, as is the year’s second-worst performing strategy, down 10.01%—and two emerging regions, Latin America (down 2.65% in August, down 0.53% YTD) and Asia-Pacific (down 2.41%, down 12.72% YTD, the worst performing strategy of 2008). Short-biased funds, the year’s best-performing strategy by far, its 9.37% return more than triple that of its closest competitor, also had a difficult month as equities rallied in August, pushing short funds down 2.61%.
Arbitrage and event-driven funds, by contrast, were able to make money in August, rising 0.31% (down 2.66% YTD). Merger arbitrage was the best-performing substrategy of the month at 1.38% (it’s also the second-best performer on the year, up 3.03%), followed by telecom and media funds (up 1.09%, down 0.57% YTD) and technology funds (up 1.05%, down 2.63% YTD). Event-driven funds added 0.75% in August, but remain down 6.5% on the year.