This past month was worse for hedge funds than was August of 2007. Granted, we don’t know the distribution of badness, so maybe there were fewer true outlier funds, but I’m still expecting some entertaining “Dear LP” notes soon.
Hedge funds are set to record their worst month of returns since 2000 after struggling to protect the value of their portfolios from last month’s volatile markets.
The industry lost 2.6% of its investors’ capital in the first 29 days of November, according to an investable, global hedge-fund index published at the end of last week by U.S. data provider Hedge Fund Research. The result is worse than the loss of nearly 2.6% recorded in August. The index hasn’t recorded another loss of 2% or more since April 2000, the end of the technology boom, when it fell 3.9%.
All hedge-fund strategies lost money in November, according to the data provider. Long/short equity funds, or equity hedge, were the worst performers with a loss of 4.3%. Event-driven funds, which invest around takeovers and corporate restructurings, were down 3.7%. Convertible-arbitrage funds, which take opposing positions in convertible bonds and shares, were down 2.8%. Distressed-debt funds were the best performers with a loss of 0.6%.