Hedge Funds Can't Hedge August Volatility

Some like to think high volatility provides opportunity for astute money managers like hedge funds to provide real alpha. Yet despite the wild swings in equity and commodity markets this month, hedge funds have lostm ore than 4% in August, 2011 according to Hedge Fund Research.

Equity hedge funds lost more than 6%, only narrowly beating the S&P 500. So have hedge fund managers lost their ability to hedge?

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U.S. Hedge Fund Pay to Fall 10 Percent This Year


U.S. hedge-fund compensation will fall an average of 10 percent this year com-
pared with 2010 as performance suffered, according to a report by Glocap Search
LLC and hedge fund research inc.
Portfolio managers’ pay, which is most closely tied to performance, should see the
biggest decline, slumping about 30 percent on average, according to Adam Zoia,
chief executive officer of Glocap, a New York-based recruiting firm.
Hedge funds have lost 5.4 percent on average this year, according to data compiled
by Bloomberg, as the European debt crisis worsened and the U.S. economy threat-
ened to slip back into recession.
“This has been a tough year,” Zoia said in a telephone interview. “People therefore
have lowered year-end expectations and those expectations will be met.”
Compensation rose in 2010, when hedge funds gained 8.2 percent on average, and
in 2009, when they climbed 9.1 percent, according to the Bloomberg hedge fund ag-
gregate index.
Pay declined in 2008, after the average fund lost 19 percent.
Glocap and Chicago-based Hedge Fund Research said they

■ Maritime Capital partners Lp, the $50 million New York-based hedge fund that pri-
marily trades intermediate duration investment grade municipal bonds, rose 0.8 percent
in September and 16 percent this year, according to a tear sheet obtained by Bloom-
berg. The fund was founded in April 2010 by baris dincer and Greg Gurevich.

Bloomberg Brief ; Hedge Funds 11.01.2011