Financial journalists are scrambling to report on the big winners and losers among the hedge funds from last week's market turmoil. So far there has been lots of speculation and rumor but very little in the way of confirmed news about specific hedge funds.
Lots of money was lost by hedge funds last Tuesday. According to the hedge fund insider newsletter FinAlternatives last Tuesday was the "Worst Day Ever" for hedge funds.
According to Hedge Fund Research, Feb. 27 was the worst day it had ever recorded for hedge funds in the four-year life of its indices.
Macro funds suffered the worst drop, losing 3% to just about wipe out year-to-date gains. Market-directional funds, emerging markets and computer-driven managed futures funds were also hurting. Citigroup, in a note Thursday, wrote that the declines, “in conjunction with the long positions still shown by our credit survey… make us concerned about further de-risking ahead.”
Arki Busson of the $10 billion fund of hedge funds EIM told the Financial Times that hedge funds had lost about two-thirds of their gains for February, but, “The good news is there were no disasters.”
The category of likely losers on Plunge Tuesday includes funds that were shorting market volatility, a strategy which has been successful in recent years and has no doubt attracted fund managers in search of gains. Others have avoided the strategy as being historically too risky, emphasizing that its recent success is anomalous.
"Shorting volatility is like picking up nickels dimes in front of a steam roller," one hedge fund insider told DealBreaker. "You can make some money. But the moment you trip up, you're in a lot of trouble.
Word has it the the Wall Street Journal will report on hedge fund winners and losers in tomorrow's edition. But tomorrow is so far away.
What have you heard? Send your insights to email@example.com.
Worst Day Ever: Hedge Funds Hurting From Tuesday’s Tumble [FinAlternatives]