Hedge Funds Await Details of Octobers Losses

Date: Friday, November 7, 2008
Author: DealBook.blogs.nytimes.com

Three services that track the hedge fund industry — Barclay Hedge, Hedge Fund Research and Hennessee Group — are expected to report over the coming days just how poorly the $1.9 trillion industry performed in October. It was a period of plunging stock prices, frozen debt markets and fire sales by banks scrambling to raise cash.

“You had one of the worst months in the equity markets that you had in decades. You add to that the ban on short-selling, which destroyed convertible arbitrage, and the equity strategies were hurt badly,” Sol Waksman, founder of Barclay Hedge, told Reuters.

Some of the most successful names in the industry were hammered last month, as funds lost more money than they did in a September that featured the Lehman Brothers bankruptcy, the near collapse of American International Group and one of the steepest stock market drops ever.

David Einhorn’s Greenlight Capital, which predicted Lehman Brothers‘ financial troubles, suffered heavy losses from a short position on Volkswagen after the German automaker’s shares spiked. Greenlight, down 16 percent in the first nine months this year, is expected to post bigger declines for October.

Kenneth C. Griffith’s Citadel Investment Group, down 15 percent in September, may also drop further in October. Lee Ainslie’s Maverick Fund is expected to be down again after falling more than 19 percent in September.

Also seen stumbling is Goldman Sachs, which told clients its $7 billion Goldman Sachs Investment Partners fund had lost nearly $1 billion since January because of bad bets on commodities, metals, energy and agriculture.

The HFRX Global Hedge Fund Index, compiled by Hedge Fund Research, had a negative 9.3 percent rate of return in October, and through Tuesday was down 19 percent this year, according to Reuters.