A defensive stance by hedge funds in August has contributed to a sour 2008 for the alternative asset class, according to the latest data from Hennessee Group LLC.
The New York-based hedge fund advisory firm reported today that the Hennessee Hedge Fund Index declined 0.7% in August and is down 4.1% since the start of the year.
This compares to a 1.2% gain in August by the Standard & Poor’s 500 Index, which is down 12.6% from the start of the year.
“This is the worst start to a year for hedge funds since the beginning of the Hennessee Hedge Fund Index in 1987,” said Charles Gradante, Hennessee Group co-founder.
This summer’s market volatility, coupled with uncertainty surrounding oil prices and the state of the U.S. economy, led a lot of hedge fund managers to take on more defensive positions, which ultimately hampered their performance in August.
“Hedge funds underperformed in August as a majority of funds were defensively positioned,” E. Lee Hennessee, managing principal, said in a statement.
“However, relative to equity benchmarks, hedge funds are out-performing (year-to-date) by a significant margin.”
While the global macro index subcategory declined 2.3% in August and is down 7.2% this year, the bright spot was the merger arbitrage category, which gained 1.4% in August and is up 3% in 2008.
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