Hedge Funds Down 2.69% In Nov., May Lose 60% Of Assets In ‘08

Dec 9 2008 | 1:59am ET

Hedge funds are slouching toward 2009, as another major index shows big losses for the industry as the year nears its end.

The Hennessee Hedge Fund Index fell a further 2.69% in November, leaving it down 18.44% year-to-date. Long/short equity hedge funds lost 3% on the month (down 17.65% YTD), arbitrage and event-driven funds lost 2.43% (down 17.63% YTD) and global/macro funds lost 2.11% (down 20.41% YTD).

Those numbers are ugly, but the optimists at Hennessee note that things could be much worse: The Standard & Poor’s 500 Index is down 38.97% this year after shedding another 7.48% in November. Not even the worst-performing strategy of 2008—emerging markets, which, ironically, was last year’s best—can top the S&P500 in red ink.

“While the Hennessee Hedge Fund Index is down 18.44% this year, it has significantly outperformed equity benchmarks on a relative basis,” said Lee Hennessee, managing principal of the Hennessee Group. “While not an attractive absolute return, many investors are thankful to have hedge fund allocations this year, especially when compared to traditional asset classes.”

Of course, when the average hedge fund is down almost 20%, the news can’t be all good.

“While many managers are seeing attractive investment opportunities, many are struggling to retain investors and their capital bases. In 2008, we have seen dramatically more hedge funds freeze redemptions/enact redemption gates and force liquidate than in the history of the hedge fund industry.” said Hennessee’s Charles Gradante. “We expect year-end investors’ redemptions to be significant, with the average fund returning 15% to 25% of investors’ assets. When you consider the significant number of liquidations, redemptions and the negative performance of hedge funds this year, it is possible that the entire hedge fund industry could start 2009 at 40% the size it was at the beginning of 2008.”

As noted above, emerging markets are on pace to be the worst-performing strategy of the year, according to the Hennessee index. They are down 33.2% on the year after losing another 6.46% in November. Other dismal efforts were put in by private investments in public equity/private financing funds (down 5.94% last month, down 16.85% YTD), convertible arbitrage funds (down 4.5%, down 24.63% YTD), Latin America funds (down 4.49%, down 27.88% YTD) and technology funds (down 4.49%, down 18.86% YTD).

On the bright side, a half-dozen strategies posted positive returns in November, although just two are in the black year-to-date. Short-biased funds remain, without peer, the best-performing strategy on the year, up 27.34% after rising 4.13% on the year. Macro funds are also up on the year, at 1.21% after adding 1.23% in November.


In Depth

Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 9:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset...

Lifestyle

Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.