Morningstar: Hedge Funds Lost 22% In 2008

Jan 22 2009 | 12:31am ET

Despite regaining some ground in December, a disastrous fourth quarter left the average hedge fund down by more than one-fifth on the year, according to Morningstar.

The Morningstar 1000 Hedge Fund Index lost 7.9% and 9.8%, respectively, in September and October, before a 2.1% rise in December cut the index’s quarterly loss to 10.3%. For the full-year, the index was down 22.2%.

“In 2008, hedge fund managers generally failed to deliver,” said Nadia Papagiannis, a hedge fund analyst at the Chicago-based research provider. “The average hedge fund may have lost less than the stock market, thanks in part to large cash allocations, but this level of performance was not why investors agreed to pay 2% management fees and 20% performance fees.”

And investors reacted: According to Morningstar, $44 billion left the industry last year in the form of redemptions, mostly in October and November. Not all hedge funds survived the onslaught of withdrawals and poor performance: The number of hedge funds dropping out of Morningstar’s database more than doubled last year, with 1,158 single-manager funds and 490 funds of hedge funds removed from the index, although not all removals are the result of hedge fund liquidations.

Last year’s best-performing strategy suffered an unfortunate turnaround this year, as emerging markets funds lost an average of 45.6%. The Morningstar Corporate Actions Hedge Fund Index fell 28.9% in 2008, while global debt funds lost 28.5%, convertible arbitrage funds lost 24.9% and debt arbitrage funds lost 16.7%. Developed markets funds fell 11.9% and global non-trend-following funds fell 1.2%.

Just one Morningstar index finished the year up: Global trend hedge funds added 9.8% last year.


In Depth

Q&A: Quad Advisors’ Borish Is Looking For Real Traders, Not Index Huggers

Aug 20 2014 | 1:43pm ET

Peter Borish, who served as founding partner and director of research at Tudor Investment...

Lifestyle

Viking Manager In Rent Dispute

Aug 11 2014 | 4:14am ET

A hedge fund manager is demanding most of his money back from his former landlord...

Guest Contributor

Majority Of Inflows Go To Brand Name Hedge Funds

Aug 12 2014 | 9:00am ET

Since the market correction of 2008, a vast majority of hedge fund net asset flows...

 

Editor's Note

 

Futures Magazine

PREVIEW July/August 2014 Cover

Inside Futures' 500th Issue

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

TAP July/August 2014 Cover

Real talk on alternative investments, business & finance

The Alpha Pages Editor's Note