Following up on the previous post on mutual funds, the environment of the hedge fund world is likewise scarred in 2011. This was a year – or at least certainly after May – to sit on hands and protect capital. Lots of churning and burning, with the main winners being brokerages who got the commissions!
Via WSJ:
- No matter which road they traveled, many hedge funds hit a dead end this year, judging from performance data compiled by Dow Jones Indexes and Credit Suisse Group AG. All seven trading strategies tracked by the Dow Jones Credit Suisse "Core Hedge Fund Index" are showing losses as of Wednesday, Dec. 14, with the entire index dropping nearly 8%. (that's even worse than the average performance of mutual funds in 2011 – a damning statement considered 98% of mutual funds are not 'hedging' a thing) Investors would have been better off in the Standard & Poor's 500-stock index, which dropped only 4% over the same period.
- The Core Hedge Fund Index is part of a series of indexes based on a database of over 8,000 hedge funds.
- It's been especially tough for hedge funds that bet on economic trends and global markets, including currencies. The Dow Jones Credit Suisse index's "Global Macro" strategy is among the worst performers, dropping over 10% – second only to the "event-driven" strategy, which involves bets on things like big mergers and dropped 13%. "Fixed income arbitrage" and "emerging markets" fared better, losing roughly 1% and 3%, respectively.
- This year has been a tough slog for many hedge funds, which struggled to stay ahead of a series of big swings in financial markets. Europe's debt troubles and global economic jitters have convinced many that markets are largely at the mercy of policy makers, making them harder to predict. (agreed)
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
