HEDGE funds worldwide posted record monthly losses in September, according to Eurekahedge, as short sale bans and client redemptions amid the credit crisis hurt funds including Citadel Investment Group.
Bloomberg news reported on Wednesday that the Eurekahedge Hedge Fund Index, which tracks 2,431 funds that invest globally, declined 4.7 per cent, preliminary figures from the data provider show.
The drop is the biggest one-month loss since it began collecting data in 2000 and the index, down 7.9 per cent through September, is set for its worst year on record.
'The volatility has been difficult even for seasoned veterans to manage; one day the markets plunge on apocalyptic fundamentals, and the next day they surge', said Mr Robert Howe, founder of Hong Kong based hedge fund manager Geomatrix, which oversees US$32 million (S$48 million).
'As many managers just liquidate to wait out the storm, or clients do it for them, money drains out of all investment strategies.'
Hedge funds have suffered from financial market contagion triggered by the collapse of the US subprime mortgage market last year, losing about US$88 billion of assets on investment declines and investor withdrawals in September.
That's reduced the industry's total size to about US$1.8 trillion, according to Singapore-based Eurekahedge.
Money overseen by hedge funds has grown to about US$1.9 trillion from US$490 billion at the start of the decade, according to Hedge Fund Research of Chicago.
Europe leads drop
Managers investing in European markets were among the worst performers, sliding 6.9 per cent, followed by those investing in emerging markets, which fell 6.8 per cent, according to Eurekahedge.
The Eurekahedge North American Hedge Fund Index dropped 5.3 per cent, while the Eurekahedge Asian Hedge Fund Index declined 4.8 per cent.
The index tracking Japan investments and Latin America were least affected, losing 4.4 per cent and 4.1 per cent respectively.
By strategy, September marked the worst month on record for so-called arbitrage and relative value funds, which attempt to profit from price discrepancies between markets, and macro funds - those seeking to profit from economic trends by trading stocks, bonds, currencies and commodities, Eurekahedge said.
Managers who trade futures, known as commodity trading advisers or CTAs, was the sole strategy that posted gains in September, as bets on oil futures and volatility helped stem losses on market-wide declines in asset prices, Eurekahedge said.
Lehman Brothers Holdings, once the fourth largest securities firm, filed for bankruptcy protection in September while American International Group, Fannie Mae and Freddie Mac were bailed out by the US government, sending the MSCI World Index into its biggest monthly slide since August 1998.
The decline in markets also came as the US Securities and Exchange Commission temporarily banned short selling of more than 900 stocks.
In a short sale, an investor sells a borrowed security, aiming to profit by repurchasing it later at a lower price and returning it to the holder, pocketing the difference.
Citadel Investment's biggest hedge fund fell as much as 30 per cent this year because of losses on convertible bonds, stocks and corporate debt, two people familiar with the Chicago based firm said earlier this month.
While hedge fund managers have struggled, they have still outperformed the key benchmarks.
An index tracking managers of so- called long-short funds, who bet on rising and falling stock prices, declined 6.6 per cent, compared with the MSCI World Index's 12 per cent slide in September, the report showed.
Among those that employ those strategies in Asia, the Tantallon Fund, a long-short fund managed by Singapore-based Tantallon Capital, declined 4.2 per cent in September, according to data compiled by Bloomberg.
Assets shrank to US$544 million at the end of the month, from $US1.5 billion at the start of the year.
The QAM Asian Equities Fund managed by Quant Asset Management, a Singapore based hedge fund, which uses computer models to pick trades, fell 4.8 per cent in September, according to the firm.
The Japan Macro Fund, run by Singapore-based Asia Genesis Asset Management, fell 1.8 per cent last month, the worst month this year, according to Mr Chua Soon Hock, managing director of the firm and the manager of the fund.
The US$745 million hedge fund trimmed its year-to-date advance to 9.3 per cent, he said.
The Akamai Pan Asia fund, run by Geomatrix, ended September down 0.8 per cent as it closed some of its short positions after countries including the US and Australia introduced temporary bans for short selling.
The fund said it bought long term holdings in Japan, Hong Kong, South Korea, Australia and India.
Bloomberg news reported on Wednesday that the Eurekahedge Hedge Fund Index, which tracks 2,431 funds that invest globally, declined 4.7 per cent, preliminary figures from the data provider show.
The drop is the biggest one-month loss since it began collecting data in 2000 and the index, down 7.9 per cent through September, is set for its worst year on record.
'The volatility has been difficult even for seasoned veterans to manage; one day the markets plunge on apocalyptic fundamentals, and the next day they surge', said Mr Robert Howe, founder of Hong Kong based hedge fund manager Geomatrix, which oversees US$32 million (S$48 million).
'As many managers just liquidate to wait out the storm, or clients do it for them, money drains out of all investment strategies.'
Hedge funds have suffered from financial market contagion triggered by the collapse of the US subprime mortgage market last year, losing about US$88 billion of assets on investment declines and investor withdrawals in September.
That's reduced the industry's total size to about US$1.8 trillion, according to Singapore-based Eurekahedge.
Money overseen by hedge funds has grown to about US$1.9 trillion from US$490 billion at the start of the decade, according to Hedge Fund Research of Chicago.
Europe leads drop
Managers investing in European markets were among the worst performers, sliding 6.9 per cent, followed by those investing in emerging markets, which fell 6.8 per cent, according to Eurekahedge.
The Eurekahedge North American Hedge Fund Index dropped 5.3 per cent, while the Eurekahedge Asian Hedge Fund Index declined 4.8 per cent.
The index tracking Japan investments and Latin America were least affected, losing 4.4 per cent and 4.1 per cent respectively.
By strategy, September marked the worst month on record for so-called arbitrage and relative value funds, which attempt to profit from price discrepancies between markets, and macro funds - those seeking to profit from economic trends by trading stocks, bonds, currencies and commodities, Eurekahedge said.
Managers who trade futures, known as commodity trading advisers or CTAs, was the sole strategy that posted gains in September, as bets on oil futures and volatility helped stem losses on market-wide declines in asset prices, Eurekahedge said.
Lehman Brothers Holdings, once the fourth largest securities firm, filed for bankruptcy protection in September while American International Group, Fannie Mae and Freddie Mac were bailed out by the US government, sending the MSCI World Index into its biggest monthly slide since August 1998.
The decline in markets also came as the US Securities and Exchange Commission temporarily banned short selling of more than 900 stocks.
In a short sale, an investor sells a borrowed security, aiming to profit by repurchasing it later at a lower price and returning it to the holder, pocketing the difference.
Citadel Investment's biggest hedge fund fell as much as 30 per cent this year because of losses on convertible bonds, stocks and corporate debt, two people familiar with the Chicago based firm said earlier this month.
While hedge fund managers have struggled, they have still outperformed the key benchmarks.
An index tracking managers of so- called long-short funds, who bet on rising and falling stock prices, declined 6.6 per cent, compared with the MSCI World Index's 12 per cent slide in September, the report showed.
Among those that employ those strategies in Asia, the Tantallon Fund, a long-short fund managed by Singapore-based Tantallon Capital, declined 4.2 per cent in September, according to data compiled by Bloomberg.
Assets shrank to US$544 million at the end of the month, from $US1.5 billion at the start of the year.
The QAM Asian Equities Fund managed by Quant Asset Management, a Singapore based hedge fund, which uses computer models to pick trades, fell 4.8 per cent in September, according to the firm.
The Japan Macro Fund, run by Singapore-based Asia Genesis Asset Management, fell 1.8 per cent last month, the worst month this year, according to Mr Chua Soon Hock, managing director of the firm and the manager of the fund.
The US$745 million hedge fund trimmed its year-to-date advance to 9.3 per cent, he said.
The Akamai Pan Asia fund, run by Geomatrix, ended September down 0.8 per cent as it closed some of its short positions after countries including the US and Australia introduced temporary bans for short selling.
The fund said it bought long term holdings in Japan, Hong Kong, South Korea, Australia and India.
