Hedge-Like Mutuals Feeling Down

Date: Wednesday, August 8, 2007
Author: Hedge Fund Daily

Mutual funds that act like hedge funds have not been practicing what they were preaching to investors – namely, that they would better withstand market turns than conventional mutuals. According to The Wall Street Journal, mutuals that bear names such as “long short” and “market neutral” have suffered nearly as badly as the Standard & Poor’s 500. All the long-short mutuals tracked were down 5.3% for July, while the S&P500 lost 5.95%. Several of those funds, did much worse, with the JPMorgan Intrepid Long Short finishing July -9.0%, Old Mutual Analytic U.S. Long Short tumbling -8.5% and DWS Discipline Long/Short Value off -8.3%. “This was their opportunity to prove their mettle,” Lipper analyst Jeff Tjorneho told The WSJ commenting on the long-short, “and they came up short.” Those mutual funds labeled “absolute return” and “market neutral” did somewhat less worse, ending a one-month period Aug. 3 around -1.24%, while only five of the 25 market neutrals that Lipper tracks inching up. The folks that run these hedge-like offerings aren’t panicking, however. Says a JPMorgan spokeswoman, “We don’t consider one month to be a time frame in which the overall performance of funds can be characterized.” Fund manager Todd Burchett, whose ICON Long Short Fund fell 7% in July, called it “an anomaly,” as the sell-off had, according to The WSJ, “an element of panic that hurt even stocks.”