Hedge funds start 2010 with small losses - HFR

Date: Monday, February 8, 2010
Author: Svea Herbst-Bayliss, Reuters

*January's drop follows on heels of strong 2009 returns

*Some prominent managers nurse losses

*Decline came as markets sold off

BOSTON, Feb 5 (Reuters) - Global hedge funds started 2010 with small losses after markets fell on fears that the global economic recovery was sputtering, data released on Friday show.

According to the data from industry tracking group Hedge Fund Research, the average fund dipped 0.71 percent in January with deeper losses at so-called global macro hedge funds pulling the overall index down.

Other research firms are expected to release their numbers early next week. Monthly performance numbers are closely watched in the loosely regulated $2 trillion hedge fund industry where managers are not required to report how much money they oversee or how much money they make or lose each month.

January's declines come on the heels of last year's strong gains -- when the industry's average 20 percent returns helped restore demand for hedge funds as dozens of managers rode the stock market's strong rally higher.

Last year's gains also helped wipe away concerns that the industry's high fees might not be justified after the average fund lost 19 percent during the financial crisis in 2008 to post its worst return ever.

Some of the industry's biggest stars suffered losses during January, according to investors who saw their returns.

Paul Tudor Jones' $7 billion Tudor BVI Global Fund was off roughly 1 percent during the first three weeks of January while Kenneth Tropin's $2.8 billion Graham Global Investment Fund II was off 6 percent through January 26.

John Paulson, whose credit funds had correctly bet on a drop in housing prices to earn billions in 2007, suffered a tough start to the year when his newly launched gold fund lost 14 percent as gold dropped and the U.S. dollar rallied.

Overall, global macro funds, which take big bets on currencies, commodities and interest rates, fell 2.16 percent during the month, HFR reported.

But some funds in that space fared well through most of January. The $7 billion Moore Global Investments Fund gained 2.3 percent though January 21.

As expected, so-called short sellers, funds that bet exclusively that the market will fall, gained by returning 1.68 percent last month.

Fixed income strategies also performed with the Fixed-Income Convertible Index gaining 2.23 percent in the wake of last year's 31 percent gain.