FAIRFIELD, Iowa, October 8, 2008 – Hedge funds dropped 5.94% in September according to the Barclay Hedge Fund Index compiled by BarclayHedge.
“This is the worst one-month decline since August 1998, when hedge funds fell 7.81%,” says Sol Waksman, founder and president of BarclayHedge.
“Ten years ago, Russia defaulted on its bonds, LTCM had to be bailed out, hedge funds were forced to deliver by their prime brokers, emerging markets were in a tailspin, and the market for mortgage-backed securities had seized up. As Yogi Berra reportedly once said, ‘It’s like déjà vu all over again.’”
Barclay’s Distressed Securities Index dropped 10.37% in September, Emerging Markets fell 10.28%, Convertible Arbitrage was down 8.97%, Equity Long Bias lost 8.29%, and the Multi-Strategy Index was down 8.16%.
“All of the MSCI Developed Market and Emerging Market country indices were down in September,” says Waksman. “As investors continue to shy away from risk, equity markets decline and credit spreads widen. Both of these factors are negative for hedge funds.”
In contrast to declines in most hedge fund strategies, the Barclay Equity Short Bias Index jumped 7.94% in September. Equity Short Bias has gained 23.42% in 2008.
“Obviously, when equity markets are in trouble, going short can provide significant gains that can help offset other losses in a portfolio,” says Waksman.
Year to date, the Barclay Hedge Fund Index has lost 11.33 percent, compared to a drop of 19.29 percent in the S&P 500.
The Barclay Fund of Funds Index lost 5.12% in September, and is down 11.42% for the year.
Click here to view five years of Barclay Hedge Fund Index data, or download 11 years of monthly data.
Sol Waksman is an experienced media source, providing perspectives on hedge fund and managed futures trends. For quotes, commentary or background, call 641-472-3456 or email swaksman@barclayhedge.com.
BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks 6,800 hedge funds, funds of hedge funds, and managed futures programs. Barclay has created and regularly updates 18 proprietary hedge fund indexes and eight managed futures indexes.
Institutional investors, brokerage firms and private banks worldwide utilize BarclayHedge data as performance benchmarks for the hedge fund and managed futures industries.