Hedge Funds Fell 1% in April as Global Markets Decline

Date: Monday, May 7, 2012
Author: Kelly Bit, Bloomberg

Hedge funds fell 1 percent in April, tracking stocks worldwide, as renewed concern that the European sovereign-debt crisis would worsen and global economic growth would stall halted an equity-market rally earlier in the year.

Hedge funds are trailing global stocks this year, gaining 3.4 percent in the first four months, according to data compiled by Bloomberg, compared with the 11 percent advance for equities worldwide, including reinvested dividends. The Bloomberg aggregate hedge fund index decreased to 117.45 from 118.60 last month as long-short equity, multistrategy (BBHFMLTI) and global macro funds fell.

“Hedge fund managers have been somewhat cautious,” according to Jay Krieger, principal at Fundamental Capital Management LLC, the $70 million Pasadena, California-based fund of funds. “They’re not going to jump on the recovery bandwagon.”

The MSCI All-Country World Index (MXWD) fell 1.1 percent, including dividends, in April as Spain entered its second recession since 2009, China’s gross domestic product slowed more than forecast and U.S. business activity cooled.

Multistrategy hedge funds fell 0.9 percent in April to limit this year’s gain to 0.9 percent, according to the Bloomberg index. Long-short equity funds, whose managers can bet on rising and falling stocks, declined 0.6 percent last month and advanced 3.1 percent in 2012. Macro (BBHFMCRO) funds, which bet on global economic trends, slumped 1.2 percent last month and climbed 1.7 percent in the first four months of the year.

Macro Strategies Trail

“The macro strategies have not done well -- it’s hard to take advantage of trends,” said Emma Sugarman, global head of capital introduction at BNP Paribas SA in New York, which helps hedge funds meet prospective investors.

The main Bloomberg hedge fund index is weighted by market capitalization and tracks 2,758 funds, 1,237 of which have reported returns for April. The index is down 9.9 percent from its July 2007 peak.

Hedge funds attracted $16 billion in new capital in the first three months of the year, boosting industry assets to $2.13 trillion, a record high, according to Chicago-based Hedge Fund Research Inc. Hedge funds with more than $5 billion in assets attracted the biggest share of investor capital in the first quarter, with $18.3 billion in net deposits. Those with less than that amount garnered almost $2 billion.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net