Saturday, 23 August 2014
Last updated 21 hours ago
Jan 8 2009 | 5:18pm ET
A pair of hedge fund index releases show that most hedge funds actually gained ground in the final month of 2008. Much too little, way too late: The average hedge fund fell by about one-fifth last year, making it one of the worst years in the history of the hedge fund industry.
The Hennessee Hedge Fund Index added 0.51% last month and Hedge Fund Research’s HFRI Fund Weighted Composite Index rose 0.42%. But the former lost 19.15% on the year, while the latter shed 18.3%. While the Hennessee Group’s Lee Hennessee put the most positive spin on the debacle possible, noting that the industry “significantly outperformed equity benchmarks on a relative basis—by almost 20%,” a spokesman for HFR was significantly blunter.
“The hedge fund industry concluded its worst year in history by snapping a six-month losing streak,” Chris Sullivan said. “Funds of funds also experienced their worst year in history, posting a decline of approximately 20% for the year.”
Another HFR index, the HFRX Global Hedge Fund Index, brought even more rain to the parade: It actually lost significant ground in December, falling 1.22%, leaving it down 23.25% on the year.
The biggest losers of 2008 included last year’s top strategy, emerging markets (down between 36.23% and 30.01%, depending on the index), convertible arbitrage (down between 20.87% and 58.37%) and distressed securities (down between 25.09% and 30.69%).
The few winners—of Hennessee’s 23 strategy indices, just two finished 2008 in the black—were led by short-bias funds, which rose between 26.31% and 28.25%, depending on the index. Macro funds also enjoyed a relatively successful year, adding between 3.37% and 5.66%. The HFRX indices show merger arbitrage funds in the black at 3.69%, a sentiment not shared by the otherwise more optimistic indices: The strategy lost 0.87% according to Hennessee, and 4.74% in the HFRI indices.
Compounding the hedge fund pain were year-end redemptions, which claimed as much as one-fourth of the assets the industry had left on Dec. 31.
“Year-end redemptions were significant, as the average fund returned 15% to 25% of investors’ assets,” Hennessee’s Charles Gradante said. “Combined with negative performance and complete liquidations, the entire hedge fund industry started 2009 at close to 50% of the capital it was at the beginning of 2008.”
Aug 4 2014 | 7:42am ET
By now, U.S. and international subscribers have received their home or office delivery of the special 500th issue of Futures magazine. You can too!—a very special offer follows. The issue is the largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders. Read more…
The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
The Alpha Pages Editor's Note