The hedge fund industry posted record losses for the year 2008, with an average hedge fund losing close to one-fifth of its value, data from Hennessee Group LLC revealed last week. However, hedge funds posted a modest gain of 0.51 percent in December, reducing the industry’s decline for the year 2008 to 19.5 percent.
While the year saw hedge funds lose much of their value to volatile markets and investor redemptions, the industry still performed better than most equity indices. The hedge fund industry beat S&P, which was down 38.5 percent for the year 2008 and outperformed the Dow Jones which fell almost 34 percent.
The year 2008 was the "worst year by far" for the hedge fund industry on record. The sharp drop in performance prompted large investor redemptions and “average funds returned 15 percent to 25 percent of investors’ assets”. “Combined with negative performance and complete liquidations, the entire hedge fund industry started 2009 at close to 50 percent of the capital it was at the beginning of 2008,” said Charles Gradante, Co-Founder of the Hennessee Group. With record number of redemption requests from investors, most hedge funds including big names like Citadel, Harbinger and Cerberus had to instate precincts to client withdrawals.
Hammered by the worst financial crisis since the 1920s, most hedge fund strategies lost money, with last year’s top performing Emerging Markets Index down 33.20 percent from January to November 2008.
Out of the 23 Hennessee strategy indices only two posted growth. The Short Biased Index rose 27.34 percent from January to November 2008. Macro funds also had a successful showing.
A separate report form the Chicago based Hedge Fund Research (HFR) also revealed similar findings. HFR’s HRI Fund Weighted Composite Index shed 18.3% in 2008. “Funds of funds also experienced their worst year in history, posting a decline of approximately 20% for the year,” said Chris Sullivan, spokesperson for HFR.
