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West Palm Beach (HedgeCo.net) – According to data released by Hedge Fund Research (HFR), the global financial and economic crises accelerated in October, contributing to continued losses in the hedge fund industry, with the HFRI Fund Weighted Composite Index falling nearly 6% for the month.
“Performance of the hedge fund industry has declined over 17% since October 2007, making the current performance drawdown the largest in history,” said Kenneth J. Heinz, President of Hedge Fund Research. “The industry has now registered five consecutive months of losses, another inauspicious first. Consolidation is likely to continue into 2009 as investors across all asset classes indiscriminately liquidate assets to move portfolios into cash holdings.”
Investors withdrew over $40 billion from hedge funds in the month of October which, in addition to $115 billion in performance-based asset losses, reduced the industry capital base by $155 billion. Assets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of Q4 2006.
As of the end of Q3 2008, HFR estimates the entire hedge fund industry to contain more than 10,000 funds, which includes more than 7,400 single-manager funds. October losses follow a challenging third quarter during which global hedge fund capital fell by $210 billion.
The largest capital reductions during the month came from Funds of Hedge Funds, from which investors withdrew over $22 billion. Funds of Hedge Funds have underperformed the overall industry so far this year, with the HFRI Fund of Funds Index posting an 18.50% decline, compared to a loss of 16% for the HFRI Fund Weighted Composite Index.
Performance losses were most significant in funds focused on Emerging Markets, Relative Value Arbitrage and Energy/Basic Materials equities.
Short Selling has posted a strong gain of over 22% for the year. Macro Systematic strategies, which employ quantitative trend-following programs, gained over 6.5% in October and nearly 15% year to date.
Fifty-two percent of October capital outflows were from firms with greater than $5 billion under management; these largest funds represent only 5.5% of the number of funds in the industry but control over 58% of all hedge fund capital.
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West Palm Beach (HedgeCo.net) - Hedge fund advisory firm D5 announced the launch of two new accounts, with each promising capacity of $50 million, for a possible $ 100 million on additional capital for the firm. The new accounts coincide with the hiring of mathematician and scientist Andrew Vizcarra as Director of research.
"Andrew’s 10 years in the study and teaching of mathematics and statistics is a great asset to our research department and is a wonderful compliment to the fundamental nature of our strategy." Theodore Dumbauld, founder of D5 said, "Mr Vizarra will focus on both the enhancement of our current strategy and the exploration of universe expansion."
D5′s strategy utilizes a relative value strategy, trading only a unique set of securities for which net asset values can be calculated.
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FINalternatives- Boston and San Francisco-based Bay Hill Capital Management this month launched its first hedge fund, a multi-strategy volatility offering with $25 million in initial assets.
According to Alec Petro, managing partner, the Bay Hill Fund has three sub-strategies: volatility arbitrage, which is a broad vega-neutral, high-frequency portfolio; dispersion, which trades different stock indices against the components that make up those indices; and relative value, which is more opportunistic and flow-driven.
“They’re not correlated so it produces a nice robust return stream, specifically in volatility,” said Petro. “It’s unique and I don’t know of any funds out there that think of volatility in different sub-strategies and combine them.”
