Hedge Funds Face Worst Quarter Since 2008

October 11 00:00 2011

New York, October 11 (RainbowNewsLine.com) – Hedge funds suffered the worst quarter results since 2008 and one of the worst in their history with losses spread across every strategy. A decline of 2.9% in September brought the losses of hedge funds for the quarter to 5.5%, according to Hedge Fund Research’s index. This result was the fourth worst in the industry’s history after 3Q and 4Q 2008 and 3Q 1998.

Growing concerns about the European debt crisis and the sluggish economy had caused returns on hedge funds to suffer across the investment scenario. The markets had been volatile and fluctuated wildly over the last three months. There was a fall of 4.9% in September and 8.7% year to date in equity hedge strategies. Within the equity hedge, there was a fall of 9.5% in the HFR Energy/Basic Materials Index with a decline of 15% year to date.

Kenneth J. Heinz, President of HFR said “Intense volatility negatively impacted nearly every area of financial markets and the hedge fund industry in September, as weakness was both pervasive and widespread.”

Even for the industry’s legends like billionaire John Paulson, whose largest fund lost nearly half its value, it has been a rough year. His Advantage Plus Fund fell 47% this year. Major losses have also been reported on his investments in Citigroup and Bank of America and also in Sino-Forest.