Hedge Funds: November 2007 Worse Than August

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%.

[via WSJ]


  1. Wasn’t the S&P500 down more than all 3 of those though? Those results are meaningless without a bench to compare to.

  2. Yes, the S&P 500 was down on the month. But, you know, the guys do sell uncorrelated absolute returns, so it is appropriate, now and then, to hold them to that.

  3. A hedge fund with losses wasn’t actually hedged.

  4. Johannes Maepa says:

    Ha, HA! What about Lahde Capital they made 1000% return.

  5. Hedge Funds should not exist. Highly speculative, highly nontransparent and most people only get burned when playing with hedgies.

  6. “A hedge fund with losses wasn’t actually hedged”
    What are you talking about? Differents fund hedge to different degrees. If every position is fully hedged then there is no upside above a risk free rate. That’s not what a hedge fund is for. Go read up on what a hedge fund is.
    “Hedge funds should not exist”

  7. >>”A hedge fund with losses wasn’t actually hedged”
    >>What are you talking about? … Go read up on what a hedge fund is.
    I fully expected such a “smarter than thou” challenge to my simple assertion. My point is that a hedge fund is flying under false colors. The name and the pitch reassures and sounds safe going in, but when it loses money some slippery character (like you) tells me to read the fine print. Everyone obviously doesn’t read the fine print and understand the high risk implications.
    Granted, hedge funds are extremely sophisticated when it comes to masking risk, and in good times pay out reliably. There’s gambling going on here? I am shocked.

  8. Considering the minimum requirements to invest in a hedge fund, coupled with that fact that most investors are institutional I’m pretty sure 99% of hedge investors are pretty clued into how a hedge fund works. False colors my ass. Go back to coding your link bait blog.

  9. >>I’m pretty sure 99% of hedge investors are pretty clued into how a hedge fund works.
    If they weren’t, November taught them.
    >>False colors my ass. Go back to coding your link bait blog.
    Sure didn’t take you long to show your true colors. I don’t have a blog BTW.

  10. Hedge funds exist in a wide assortment of styles. Some can capitalize on the very high level of choppiness of the market in November, some can’t. I know of at least one fund which was up over 7% in November by being low in risk

  11. Chester Grenada says:

    Why no mention of Market Neutral funds? They were the only strategy to post gains in Nov, 0.34%. Who does the research here?