Nov09: Hedge Funds report

By: ispeculatornew
Date posted: 12.19.2008 (4:00 am) | Write a Comment  (1 Comment)

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The numbers are out for the performance of Hedge Funds for the month of November according to Credit Suisse/Tremont Hedge fund index. The main headline is a global performance of -4,15% for hedge funds which brings it to -19,04% YTD, a bad performance yes, but still much better than equity indexes (major global indexes are down 46% on average in 2008)

In November, only 3 type of hedge funds actually were able to come out with a profit. Of course, the “Short Bias” funds did well, generating a 3,04% return, not very surprising given the market movements. Then managed futures also performed well getting a 3,22% return, the highest in November. The final winner of the month was the global macro category, up 1,54%.

On the bottom, we can find fixed income arbitrage at -5,60% and a crazy return of -40,45% for equity market neutral, which sounds insane and is difficult to understand really! Apparently, 3 of the funds in the index were invested in the Madoff fraud and have thus recorded returns of -100% for the month… talk about a tough time for those investors.

While many funds are being hit with redemptions, one of the few categories doing a lot better is global macro funds. “If you look at the performance of hedge funds, global macro guys have shown the best performance. Certainly, wealthy people have taken notice,” said Quincy Krosby, chief investment strategist for Hartford Financial Services Group Inc. Many reasons are behind it but one of those is certainly that while it is unclear what is happening to single markets or single securities, trading on a global view is a lot clearer to many funds. Another important reason is that these funds are generally very liquid. They will usually be trading only the most liquid products in each asset class which has been a huge advantage this year as many illiquid funds have had a lot of problems dealing with redemptions from investors that created even more downward pressure on the fund’s returns.

These funds have seen many extremes depending on a correct or incorrect view of the economy but a lot of what has happened was anticipated by those who predicted either a recession or even a depression. Strategies of short commodities, long US dollar, long government bonds have been good examples of great sources of returns for these funds. And one of the more recent ones seems to be short GBP! Of course, the challenge for these funds will be timing their re-alignment in the anticipation of an economic return. It should make for a very interesting year in 2009 for investors and managers of these funds!

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1 Comment

  1. Pingback by Four Pillars Investing — December 22, 2008 @ 4:04 am

    […] The Intelligent Speculator gives a hedge fund report. […]

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