July A Real Downer For Hedge Funds

Date: Wednesday, August 1, 2007
Author: Hedge Fund Daily

Given the market conditions of the moment, no one will be surprised that July hedge fund figures will be a serious downer for several strategies. “The winners and the losers will soon become clear,” Taco Sieburgh Sjoerdmsa, director of research at hedge fund advisory Liability Solutions, told Dow Jones Newswires. “There will be a lot of funds who have done very poorly, though the attraction of the hedge fund industry is that some managers saw this coming and have positioned their funds to make money.” Hedge Fund Research already has reported that as of July 30, 10 of the 12 strategies in its investable hedge fund indices were negative for the month, with long/short equity and merger arbitrage among those hard hit. Its worst performer reportedly is global macros, which tumbled 4.48% as of July 30, and sending its year-to-date percentage to -0.97%. According to DJN, some hedge funds are likely to report double-digit losses of 20% or greater. “The long/short equity guys were doing all right through July 20 or so,” Yannis Procois of Bermuda-based fund of hedge fund CMA said in a DJN interview, “but we are expecting to see a lot of those profits given back.” As for the credit hedge funds, which stand at the eye of the storm, “the real difference...will be dispersion,” an unnamed HF manager told DJN. “In a normal month, a good performer might be up 1.5% and a bad one down 0.5%. This month, the best ones are up 10% and the bad ones are in the double digits.” Some hedge funds showed off their talent in July by actually winning big in the troubled market. MKP Capital Management’s $400 million flagship credit fund was up 22.6% for the year as of July 27, while the credit structured fund at Brigadier Capital topped 8% through mid-July and its Pursuit Opportunity Fund, focusing on asset-backed securities, gained 5% and was expected to show further growth in July. Paulson & Co. has seen its related fund that shorts subprime soar 129% for the first half of the year. On the downside, the Horizon Fund tumbled 32.9% in June and was bracing more bad news for July, while Highland Capital’s special opportunities fund fell 17.5% in June and was expected to be deeper in the hole last month.