Hedge funds hit hard in May
The last time hedge funds struggled this badly in a single month was November 2008, after the Lehman bankruptcy.
The Daily Reckoning
Addison is editorial director of The Daily Reckoning and executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post, as well as major network news programs.
Subscribe Today to the Monitor
To dial back to the last time hedge funds struggled this badly in a single month, you’d have to look at November 2008. That was in the aftermath of the Lehman bankruptcy when they lost on average only a touch more, about 3 percent.
According to Bloomberg:
“Almost every strategy lost money in May, according to Hedge Fund Research Inc. in Chicago, as the Dow index of 30 big stocks sank 7.6 percent including dividends amid speculation that Greece’s debt problems would spread to nations such as Spain and Portugal. Some of the best-known funds saw their gains for this year erased.
“’Attempting to manage risk in an environment where everything that could go wrong does go wrong seems like a fruitless endeavor,’ said Brad Balter, who runs Balter Capital Management LLC, a Boston firm that invests in hedge funds for clients. ‘The only defense that seems to work in months like these is being in cash.’
“Paulson’s Advantage fund dropped 6.9 percent through May 21, dragging it to a year-to-date loss of 3.3 percent, according to investors with knowledge of the results, who asked not to be named because the information is private. Halvorsen’s Viking Global fund fell 3.4 percent in the same span and 2.9 percent for the year. Bacon’s Moore Global declined 7.7 percent as of May 20 and 4.8 percent in 2010, investors said.”
The coverage suggests much of the poor performance can be blamed on the market and the Dow’s “worst May since 1940.” And, in addition to the above, some of the biggest losers include SAC Capital Advisors, which manages roughly $12 billion and lost about 2.9 percent; Citadel Investment Group, a $12 billion hedge fund that gave up 2 percent; and Brevan Howard Asset Management, Europe’s largest hedge fund. Perhaps this incidental tally provides a bit more evidence that the US and Europe are still holding hands on their ride down this slippery slope.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.