Hedge Funds Lose 2.9% in Worst Month Since September

Date: Thursday, June 7, 2012
Author: Kelly Bit, Bloomberg

Hedge funds fell 2.9 percent in May, their worst month since September, as stocks slumped on concern Greece may exit the euro and the global economy is weakening.

The decline was driven by long-short equity, multistrategy and global macro (BBHFMCRO) funds, according to data compiled by Bloomberg. Hedge funds have lost 1.3 percent since the start of the year, trailing a 0.9 percent gain for equities worldwide, including reinvested dividends.

“It’s very hard for hedge funds across the board to generate positive returns if equities around the world are selling off significantly, the dollar is strengthening, commodities are selling off significantly,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “It’s definitely the worst month in absolute returns for hedge funds in 2012.”

Funds including John Paulson’s Paulson & Co. and William Ackman’s Pershing Square Capital Management LP slumped in May as the MSCI All-Country World Index (MXWD) sank 8.9 percent, including dividends. U.S. employers added fewer jobs than forecast, the American service sector slowed and euro-region unemployment rose to a 15-year high.

Paulson Funds

Paulson, the billionaire hedge-fund manager seeking to reverse record losses in 2011, posted a 13 percent decline last month in his gold fund as bullion and mining stocks fell, a person briefed on the returns said today. The loss leaves the $1.2 billion fund, which can buy derivatives and other gold- related investments, down 23 percent this year.

Paulson & Co., which manages about $24 billion, posted losses during May in its Advantage funds, Recovery Fund and Partners Enhanced fund. Paulson’s Credit Opportunities Fund rose 0.9 percent last month and 5.3 percent in 2012.

Funds that rose in May include Quantitative Investment Management LLC, the $4.6 billion Charlottesville, Virginia-based managed futures fund by Jaffray Woodriff. The firm posted a 7.2 percent May advance in its QIM Global fund, bringing yearly gains to 8 percent, according to a person briefed on the returns, who asked not to be identified because the information is private. QIM Tactical Aggressive, the firm’s long/short equity futures strategy, rose 5.9 percent last month and 3.9 percent in 2012. Mary Beth Grover, a spokeswoman for QIM, declined to comment on the returns.

Long-Short

The main Bloomberg hedge fund index is weighted by market capitalization and tracks 2,718 funds, 1,236 of which have reported returns for May. The index is down 14 percent from its July 2007 peak.

Multistrategy (BBHFMLTI) hedge funds fell 3.9 percent in May and 3.2 percent this year, according to the Bloomberg index. Long-short equity funds, whose managers can bet on rising and falling stocks, declined 3.2 percent last month and 0.2 percent in 2012.

Kingdon Capital, the $2.7 billion hedge fund run by Mark Kingdon in New York, posted a 4.5 percent decline last month in Kingdon Associates, a global long-short equity fund, reducing year-to-date gains to 6.6 percent, according to an update to investors dated May that was obtained by Bloomberg News. Patrick Clifford, a spokesman for Kingdon Capital, declined to comment on the returns.

Macro funds, which bet on global economic trends, slumped 2.5 percent last month and 0.9 percent in the first five months of the year.

Elliott Loss

Elliott Management Corp., the $20 billion New York-based hedge fund founded by billionaire investor Paul Singer, posted a 1.4 percent decline in its Elliott International Ltd. fund, its biggest monthly loss since November 2008, according to an update sent to investors. The decline pares 2012 gains to 3.1 percent. Elliott Management declined to comment on the returns.

Pershing Square Capital Management LP, the $10.5 billion hedge fund run by Ackman, who is known for investing in companies to press for changes, slumped 7.1 percent in May in its $6 billion Pershing Square International Ltd. fund, paring yearly gains to 2.4 percent this year, according to a monthly performance update to investors that was obtained by Bloomberg News. Pershing Square, based in New York, declined to comment on the returns.

Andrew Hall, the former Citigroup Inc. energy trader who runs $4.4 billion commodities hedge fund Astenbeck Capital Management LLC, lost 14 percent last month and 6.4 percent this year, according to an investor. The fund, based in Westport, Connecticut, declined to comment on the returns.

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