Cash disappears as the industry loses $384bn
The popular view of hedge fund performance for last year was that it was a disaster. However, the clouds had a silver lining for managers that profit when markets fall – they enjoyed their best year yet.
Overall, funds lost 18.3% on their investments, one of only two losing years since 1990, according to database Hedge Fund Research. The MSCI index of global shares lost 42%, while bonds made 6.1%.
Antonio Borges, chairman of industry body the Hedge Fund Standards Board, said: “Hedge funds have lost less than other asset classes, but they could not remain immune from the unprecedented shrinkage in markets.”
Although hedge funds regained some ground last month, making $5bn (€3.9bn) or 0.4%, they lost $24bn through redemptions. All but 5% of the industry’s $384bn asset contraction last year came in the last four months, said analysts Eurekahedge.
However, computer-driven investing across capital markets made about 13.9%, according to BarclayHedge, while global macro funds, whose investments span a similarly broad area, made 5.7%.
Short-sellers returned 28.3%. Aureliano Gentilini, global head of hedge fund research at data provider Lipper, said these strategies would probably benefit from strong market trends this year.
The success of short-selling has encouraged John Cenedella, former trader at GLG partners, to found Forbes Investment Management and launch a short-selling portfolio.
However, the good news for the $1.6 trillion industry stopped there.
Equity-focused funds fell 26.4%, while managers in emerging markets shares lost 36.2%. Those focused on Asian markets excluding Japan lost one third of their value. Tony Jordan, chairman of the Asian ex-Japan investment team at Atlantis Investment Management, said spending on infrastructure to “pump-prime economies” was a theme in Asia this year.
Steep falls by convertible bonds left managers arbitraging between bonds and shares, down 34.6%, the year’s worst strategy, although they made 0.5% in December as convertibles have rallied about 9%, according to the UBS index monitoring their value.
del.icio.us
Digg
Newsvine
reddit
StumbleUpon