Market Turbulence Hurts U.K. Funds of Hedge Funds

Dec 5 2008 | 12:05pm ET

U.K.-based funds of hedge funds lost gorund during the third quarter, falling 9.7%, the lowest return that BNY Mellon has seen since the company started to measure fund of hedge fund performance in 2003.

New statistics released by BNY Mellon Asset Servicing this week show that funds of funds were outperformed by a number of asset classes during the third quarter such as bonds, property and cash. They did, however, outperform against many of the equity funds including U.K. equity (down 13%), emerging market equity (down 20.3%), Pacific Basin ex-Japan equity (down 16.3%) and European ex-U.K. equity (down 13%) funds.

At the end of September, the average British fund of funds held 44.4% of its assets in directional strategies, 13.4% in event driven strategies, 16.6% in non directional strategies and 25.6% in other (unspecified) strategies and cash, according to BNY Mellon.
“Given the extraordinary market turbulence we have seen, it is perhaps not that surprising that pooled fund of hedge funds suffered in these volatile conditions and on average produced negative returns in all three months of the last quarter,” said Alan Wilcock, BNY Mellon Asset Servicing's performance and risk analytics manager.

“Along with other asset classes, pooled funds of hedge funds have not come away unscathed from the recent events in the market place.”

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