The hedge fund sector lost $350 billion, or about 12% globally in 2008, according to data compiled by Eurekahedge.com(subscription required.) Further, funds that invested in North America lost the most, registering a $183 billion loss for the year.
Also, concerning strategies as 2009 begins, Eurekahedge concluded that most hedge fund managers are currently positioned for an environment of heightened risk aversion and volatility, with lower leverage levels, and high cash positions, throughout the sector.
In addition, Eurekahedge sees trend-based and arbitrage strategies in the commodities and currency markets as the likely best hedge fund performers short-term, with opportunistic / value plays in the credit markets, and to a lesser degree, in the stock markets, performing better longer-term.
Economist Richard Felson told BloggingStocks Wednesday no hedge fund strategy escaped the negative consequences of the global financial crisis.
"No strategy escaped un-scarred. Arbitrage, macro, multi-strategy, value...they all took a beating," Felson said. "So the thesis of absolute return has been dispelled again. Every investment carries some risk and there are no guarantees in the investment world."
Still, Felson was careful to point out that while the hedge fund sector lost 12-20% in 2008, depending on the methodology and the index cited, "many global stock markets, and certainly U.S. stock markets fared much worse in 2008." The Dow lost 33.8% in 2008, the S&P 500 lost 38.5%, the worst year for each since 1937.
Sector Analysis: Many hedge funds have closed - - data suggests a 15-25% industry contraction - - and of course others have restricted / prevented redemptions. Bottom line: hedge funds are only suitable for selected accredited investors.
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Reader Comments (Page 1 of 1)
1-14-2009 @ 2:52PM
ATHELSTAN said...
Leaving your money in the hands of hedge fund managers is second stupidest thing you can do. After permitting Bernie Madoff to manage your investments.
Most of these guys and gals if they aren't in prison now, they will be in due course. The rich who lost money from both Madoff and hedge funds are proof wealth doesn't guarantee foresight and great brains. Better to leave your money in an exchange traded fund investing in the SP500.