Barclay Hedge Fund Index slides again in August as 2008 decline passes 5.5 per cent

‘August was a difficult month for global equity markets,’ says BarclayHedge founder and president Sol Waksman. ‘All but two of the MSCI Developed Markets Country indices and three of the Emerging Market Country indices reported losses for the month.’

Overall, 12 of Barclay’s 18 hedge fund indices declined in August. The Emerging Markets Index dropped 4.51 per cent, and has lost 16.22 per cent in the first eight months of 2008. Equity Market Neutral declined by 2.07 per cent, Equity Short Bias by 1.63 per cent, Pacific Rim Equities by 1.22 per cent, and Event-Driven Index by 1.24 per cent.

‘Taken as a group, hedge funds typically have a positive correlation with equity prices and a negative correlation with credit spreads,’ Waksman says. ‘Whenever equity prices decline and credit spreads increase at the same time, it becomes more likely that hedge fund strategies will lose money.’

However, Barclay’s Healthcare and Biotechnology Index gained 0.95 per cent in August. Technology was up 1.05 per cent, Merger Arbitrage by 0.66 per cent and European Equities by 0.62 per cent. The strongest hedge fund sector so far this year is Equity Short Bias, which has gained 15.05 per cent in eight months.

BarclayHedge, formerly known as the Barclay Group, was founded in 1985 and tracks more than 6,800 hedge funds, funds of hedge funds, and managed futures programmes for its 18 proprietary hedge fund indices and eight managed futures indices, used as performance benchmarks by clients including institutional investors, brokerage firms and private banks.

The asset-weighted Credit Suisse/Tremont Hedge Fund Index was down 1.47 per cent in August, according to Oliver Schupp, president of Credit Suisse Index, who says: ‘Dedicated short bias managers shorting financials were hit especially hard throughout the month.

‘However, while all ten sectors posted negative returns for the month, total returns were down less than in July.’ The broad-based index, which is currently composed of 496 funds, was completely flat in June and fell by 2.61 per cent in July, bringing its decline over the year to date to 3.55 and per cent.

The best-performing strategies in the index so far in 2008 have been dedicated short bias, which fell 4.50 per cent in August but is still up 10.09 per cent for the year, managed futures with 7.30 per cent and global macro with 4.89 per cent.

The biggest losers are fixed-income arbitrage with a decline of 5.13 per cent, multistrategy funds with 5.69 per cent, long/short equity with 5.92 per cent, convertible arbitrage with 8.20 per cent and emerging markets with 10.03 per cent.

The Credit Suisse/Tremont AllHedge Index, an investible index comprising the 10 Credit Suisse/Tremont Sector Invest indices, was down by 1.06 per cent net in August, following a decline of 2.9 per cent in July, and has fallen 5.77 per cent so far this year.

The Blue Chip Index, an investible index composed of the 60 largest funds across the 10 style-based sectors, was down 0.82 per cent last month after losing 2.57 per cent in July, and has fallen 4.26 per cent over the first eight months of the year.

The Credit Suisse/Tremont LEA Index, an asset-weighted composite index covering the emerging markets hedge fund universe, was down 4.27 per cent in August after losing 4.59 per cent the previous month. Its Latin America sub-index was down 1.77 per cent last month, emerging Europe, the Middle East and Africa by 10.89 per cent (following a loss 0f 11.62 per cent in July) and Asia by 2.64 per cent.