November bloodiest month for hedge funds in 7 years

Date: Thursday, December 6, 2007
Author: FT Alphaville

Hedge funds are set to record their worst returns since 2000, according to the latest data from Hedge Fund Research.

The WSJ reports the industry as a whole lost 2.6 per cent of investors capital over the first 29 days of November.

What’s more, losses were taken across the board. Long/short equity strategies lost the most, - down 4.3 per cent, followed closely by event driven, down 3.7 per cent. Convertible arb were down 2.8 per cent, while distressed-debt funds came out best with losses of only 0.6 per cent.

November and August this year will be the only two months in seven years when the industry as a whole has seen a decline of more than 2 per cent.

Dealbreaker, who have a good roundup, also hint at vindication for reports they made of a big quant fund liquidating its equity positions.

November was painful too for UK funds. Egerton Capital’s long/short European equity fund was down 5.5 per cent for the month to November 22 (up 12 per cent ytd) and Sloane Robinson’s European fund was down 5.1 per cent to November 21 (up 11 per cent ytd).

And anecdotally, from Fintag:

It has been tough for some of my funds. The markets are officially mad, irrational and illiquid. The volumes are low and most prices are based off computer driven limit orders that are cancelled at the last minute.

By way of a disclaimer, of course, the data is “preliminary” and can’t claim to reflect the whole industry. But worst performance in 7 years is still pretty bad.