Hedge Fund of Funds’ Revealing Q3 Report

Seeking Alpha – This morning I pulled out a third quarter report for a hedge fund of funds and read it. It had some numbers in it that weren’t particularly good, but were way better than I thought they’d be.

But I really wasn’t focused on the numbers this morning. I wanted to understand what had happened and what is going to happen in the hedge fund market going forward. And this letter was revealing on both fronts.

From what I could tell by reading the letter, it was nearly impossible to make money managing a hedge fund in the third quarter. I am sure that there are some hedge fund managers who made money in the third quarter but most of the biggest and most experienced hedge funds lost money in the third quarter.

And I suppose the same is going to be true for October, when the numbers come in. If anything, October has been worse in many ways than September was. And yet, the vast majority of hedge fund managers are optimistic. It probably goes without saying that you have to be optimistic about your ability to make money to be a hedge fund manager. But this quote sums up a lot of managers’ thoughts that were expressed in the letter:

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