Street.Com- A tumultuous market on Wall Street is battering hedge fund managers harder than they’ve experienced in years.
Hedge funds saw their worst month performance in about five years in January, generating a composite loss of 2.46%. It’s the group’s worst month since July 2002, when funds saw a loss of 2.86%, according to Chicago-based industry data group Hedge Fund Research.
Many hedge funds use leverage provided by banks in order to boost their returns. Conversely, losses also can be magnified when the rapid depreciation of asset values compels lenders to ask their borrowers to post more collateral to support their leveraged bets.
Troubles for hedge funds began last summer when the credit markets encountered an unprecedented seizing spurred by the deterioration in housing. Fast forward to the first quarter of 2008 and many funds are finding that things have only gotten worse, especially given that investment banks such as CitigroupC, JPMorgan ChaseJPM, Bear StearnsBSC, Merrill Lynch MER and others are tightening the screws on their underwriting in an effort to keep borrowers on much shorter leashes.
