A Bloody November For Hedge Funds But November 30 Rally Lessens The Damage

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In early November we began warning our readers that many hedge funds were taking a serious beating in the choppy market. The market movements and rumors suggested that at least a one large quantitative fund sold off huge equity positions, perhaps wary that the the month looked particularly unpromising for most strategies.
Now the preliminary numbers are in, and they show that November looks like the bloodiest month for hedge funds in recent memory. According to preliminary figures from Hedge Fund Research, the first 29 days in November were the worst month for hedge funds since 2000. Every hedge fund strategy was generating losses last month.
The $1.33 trillion Global Hedge Fund Index measured by HFR lost 2.6 per cent of its value in the first 29 days of last month. Much of the damage was caused by the huge volatility in global markets across a number of asset classes. It seems that whatever the strategy might be called, most hedge funds are still attempting to make money by shorting volatility.
Long/short equity strategies lost the most, declining 4.3% according to HFR. Event-driven funds sank down 3.7%. Convertible-arbitrage funds fell 2.8%. The best bet was distressed-debt funds, which suffered losses of only 0.6%.
Update: Thanks to one of our readers, we see that the HFR index numbers have now been updated through November 30th. The good news for fund managers is that the indexes show a bit of a rally. The rally in equities at the end of the month gave many strategies a boost, pulling them back from their record losses. The equity market neutral strategy that includes most so-called quant funds actually saw a tiny gain, increasing 0.15%. The equity hedge index pulled back from it's 4.3% loss to just 3.7%.
Please remember that these indexes have their limitations. They rely on reported numbers, and many hedge funds are reluctant to publicly reveal their performance. What's more, these are the preliminary numbers. The fuller results won't be out until next week.
Hedge funds set for losses in November [Times]