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Hedge Funds Down A Record 20% In Six Months

by Carla Johnson, Investors

17 December 2008

Hedge funds lost another 2.34% in November according to the Barclay Hedge Fund Index compiled by BarclayHedge. Hedge fund returns as measured by the index are down an unprecedented 20.63% since June 2008.

“The past six months of losses have been the worst on record for the hedge fund industry,” says Sol Waksman, founder and president of BarclayHedge.

“Prior to 2008, the longest string of consecutive losing months was three. Hedge funds lost 4.25% from September through November of 2000, and then 3.30% from July through September of 2001.”

Many hedge fund strategies experienced significant losses in November. Barclay’s Equity Long Bias Index dropped 4.81%, Healthcare and Biotechnology fell 4.50%, the Emerging Markets Index was down 4.22%, and Convertible Arbitrage lost 3.69%.

Emerging Markets has been the worst performing strategy in 2008, losing 39.34% year-to-date. Equity Long Bias is down 28.81%, and Convertible Arbitrage has lost 28.02%.

“Early in 2008, there was a great deal of discussion about how emerging markets had ‘decoupled’ from developed markets,” says Waksman.

“The current economic environment has clearly demonstrated that when consumption decreases in developed nations, exporting nations also feel the pain," he adds.

Four of Barclay’s 16 hedge fund indices provided positive returns in November. The Barclay Equity Short Bias Index gained 3.51%, and is up 43.76% in 2008.

Barclay’s Global Macro Index rose 1.47% in November, Pacific Rim Equities gained 0.23%, and Equity Market Neutral was up 0.13%.

Equity Market Neutral is now down just 0.98% for the year, and Global Macro has a loss of 1.32%.

Through November, the Barclay Hedge Fund Index has fallen 21.27% in 2008, compared to a loss of 37.66% in the S&P 500.

The Barclay Fund of Funds Index was down 1.64% in November, and has lost 20.04% year-to-date.

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