Most hedge fund strategies experienced widespread and significant losses in August, contributing to a 3.42% fall in the Barclay Hedge Fund Index compiled by BarclayHedge. Year-to-date, the Index is down 2.50%.
“In what has been the worst month since Lehman’s failure in September 2008 when hedge funds dropped 6.99 percent, more than 83 percent of the 3,120 funds that have so far provided us with an August return have reported a loss,” says Sol Waksman (pictured), founder and President of BarclayHedge. “The Barclay Hedge Fund Index is now in negative territory for the first time in 2011.”
All but one of Barclay’s 18 hedge fund indices had losses in August. The Equity Long Bias Index dropped 5.42%, Healthcare & Biotechnology fell 5.20%, European Equities were down 4.92%, Emerging Markets lost 4.85%, and the Distressed Securities Index was down 4.05%.
“Markets panicked,” says Waksman. “The threat of a banking system crisis triggered by a sovereign debt default coupled with a lack of political leadership and a weakening economic outlook drove investors to seek shelter from the storm.”
The one strategy that proved profitable was the Barclay Equity Short Bias Index, which soared 7.25%. Equity Short Bias is now up 6.07% through August.
“After eight months of difficult trading conditions, hedge fund managers trading the short side of equity markets have made a strong comeback over the past four months,” says Waksman. “Short sellers had their largest one-month gain since October 2008, when stocks plummeted and Equity Short Bias funds gained 12.27 percent.”
The Barclay Fund of Funds Index lost 2.44% in August, and is down 2.86% year-to-date.