Hedge Funds Fell 4.68% in September, Biggest Drop in 10 Years

Date: Wednesday, October 8, 2008
Author: Gillian Wee, Bloomberg

Hedge funds worldwide in September recorded their biggest drop since August 1998, hurt by losses in commodities and fixed-income convertible arbitrage securities.

The HFRI Weighted Composite Index fell 4.68 percent in September, marking the fourth consecutive monthly decline and extending the loss this year to 9.41 percent, according to Chicago-based Hedge Fund Research Inc. The worst monthly performance since the firm began tracking the industry in 1990 was an 8.7 percent decline in August 1998.

``In 1998, there was the liquidation of Long Term Capital Management, which created a systemic financial situation that resulted in steep declines at a lot of funds,'' said Ken Heinz, president of Hedge Fund Research, in a telephone interview. ``There are a lot of similarities and parallels during that period of time and this one.''

Funds investing in energy and basic materials lost the most in September, falling an average of 13 percent, while the fixed- income convertible arbitrage funds dropped 12 percent, the researcher said.

Lee Ainslie's Maverick Capital Ltd., David Einhorn's Greenlight Capital LLC and The Children's Investment Fund Management LLP fell more than 12 percent in September as stock hedge funds posted record monthly losses and braced for client defections.

Stephen Mandel's main Lone Cypress fund in Greenwich, Connecticut, fell 14.7 percent, while New York-based Third Point LLC, run by Daniel Loeb, dropped 11 percent.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.