Bloomberg News

Hedge Funds Slumped 3.2% in September as Global Stocks Tumbled

October 06, 2011

Oct. 6 (Bloomberg) -- Hedge funds slumped 3.2 percent in September, their worst performance in more than a year, as global stocks tumbled amid a worsening European debt crisis and the threat of a U.S. recession.

The Bloomberg aggregate hedge-fund index decreased to 119.53 from 123.53 in August, contributing to a decline of 0.9 percent this year. Long-short equity funds, multistrategy funds and macro funds, which bet on global economic trends, fell.

“It was one of the worst months we’ve seen since 2008,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “From a hedge-fund manager’s standpoint, there’s a lot of stress to navigate these markets. Any strategy that was exposed to the fixed-income and equity markets generated negative returns.”

The MSCI World Index of global stocks tumbled 8.6 percent in September, including dividends, as Greece edged closer to defaulting on its sovereign debt and the cost of insuring western European countries’ loans rose to records. The Federal Reserve said Sept. 21 that there are “significant downside risks” in the U.S. economy, prompting the central bank to announce a $400 billion debt-trading plan to spur growth as the recovery from the worst contraction since the Great Depression falters.

Bloomberg’s aggregate index fell the most since May 2010, when funds dropped 4.3 percent.

Multistrategy, Macro

Multistrategy hedge funds declined 3.1 percent in September and 1.3 percent in 2011. Macro funds decreased 2.4 percent in September and 3.3 percent in the year’s first nine months. Long- short equity funds, whose managers can bet on rising and falling stocks, lost 4.4 percent last month and 2.6 percent this year.

“Volatility on the market caused by fears over Europe and recessionary fears here in the U.S. is definitely causing concerns for people,” said Emma Sugarman, head of the U.S. capital-introductions group at BNP Paribas SA in New York, which helps hedge funds meet clients. “Investors will be considering year-end redemptions very carefully.”

The main Bloomberg hedge-fund index is weighted by market capitalization and tracks 2,828 funds, 1,411 of which have reported returns for September. The index is down 8.3 percent from its July 2007 peak.

Hedge funds, investment pools that can wager on or against any asset, hold about $2 trillion, according to Hedge Fund Research Inc. in Chicago.

--With assistance from Lynn Thomasson in Hong Kong and Michael Patterson in London. Editors: Josh Friedman, Steven Crabill

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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