2008 … ugly HF year …

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

What we already know … but what still reads CRUEL … for the ones who did not “care”

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.”

It still hurts, doesn’t it???

“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.

2009 can only be better … THEY THINK

Tags: 2008, Hedge Funds

This entry was posted on Donnerstag, Dezember 11th, 2008 at 10:07 and is filed under FDAX. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.