Hedge Funds Slide In August

by Phillip Morton, Investors Offshore.com

23 September 2008

Hedge funds declined 1.07% in August according to the Barclay Hedge Fund Index compiled by BarclayHedge. Year to date, the Index is down 5.59%.

"August was a difficult month for global equity markets," says Sol Waksman, founder and president of BarclayHedge.

"All but two of the MSCI Developed Markets Country indices and three of the Emerging Markets Country indices reported losses for the month."

Overall, 12 of Barclay’s 18 hedge fund indices declined in August. The Emerging Markets Index dropped 4.51%, and has lost 16.22% in the first eight months of 2008.

Equity Market Neutral fell 2.07%, Equity Short Bias lost 1.63%, Pacific Rim Equities slid 1.22%, and the Event Driven Index was down 1.24%.

"Taken as a group, hedge funds typically have a positive correlation with equity prices and a negative correlation with credit spreads," says Waksman.

"Whenever equity prices decline and credit spreads increase at the same time, it becomes more likely that hedge fund strategies will lose money," he adds.

On the positive side, Barclay’s Healthcare and Biotechnology Index gained 0.95% in August, Technology was up 1.05%, Merger Arbitrage gained 0.66%, and European Equities rose 0.62%.

The strongest hedge fund sector year to date is Equity Short Bias, which has gained 15.05% in eight months.

The Barclay Fund of Funds Index was down 1.44% in August.

BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks more than 6,800 hedge funds, funds of hedge funds, and managed futures programs. Barclay has created and regularly updates 18 proprietary hedge fund indexes and eight managed futures indexes.

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