Greece crisis snares hedge funds

Date: Monday, July 11, 2011
Author: Richard Blackden, The Telegraph

The Greek debt crisis snared hedge funds in Mayfair and Manhattan last month, according to new surveys of the industry's performance.

Average losses for hedge funds in June were 1.6pc, according to the Hedge Fund Research HFRX Index. After a difficult May, it takes losses for the year to 2.1pc, according to the index that tracks about 2,000 funds.

The volatility in financial markets created by the latest flaring in Greece's debt crisis left most strategies struggling to generate positive returns. Analysts said it is likely that some funds will rein in bets during the second half of the year to preserve gains they may have or to limit the potential for future losses.

"Market sentiment was initially bearish in the month, amid concerns of a slowdown in the US economy as well as the European sovereign debt crisis," said a separate report from Eurekahedge, which also tracks the industry. "Trend followers struggled through another month of trend reversals and market unpredictability leading to losses."

Eurekahedge said the funds it tracked had average losses of 1.27pc in a month in which none of the principal trading strategies worked. From long-only funds investing in shares through to those using bonds, currencies and commodities to make bets on broader trends, all were stymied by a month marked by confusion over the global economic outlook and uncertainty over Greece.

As far as geography, Japanese funds bucked the downward trend, according to Eurekahedge, helped by a stronger performance from the Nikkei 225. The struggle of the industry last month has turned the spotlight on to some of its biggest figures. John Paulson, who made billions betting that US house prices would fall, is said to have seen one of his funds, the $9bn Advantage Plus, off by around 20pc during the first few weeks of June.