August slump for leading hedge funds

MANY of the best-known names in hedge funds suffered in August despite the slump in financial stocks that helped them make gains during the banking crisis.

SAC Capital Advisors, Third Point Offshore Fund and T2 Partners were among the losers in a month when the Eurozone debt crisis, an anaemic global recovery and British concerns over the effect of the Independent Commission on Banking weighed heavily on the value of equities here and abroad.

Steven Cohen’s SAC Capital Advisors lost about three per cent, Dan Loeb’s Third Point Offshore Fund fell 2.8 per cent and David Einhorn’s Greenlight dipped 1.4 per cent, people familiar with their returns have said.

Whitney Tilson’s T2 Partners told investors the fund declined 13.7 percent last month, leaving it off 22.1 percent for the year. The long side was “clobbered across the board” despite better performances at its major holdings, he added.

The average loss across the industry was 5.85 per cent in August, according to Hedge Fund Research, compared with the 4.4 per cent drop of the Dow industrials and the 5.61 percent drop registered by the Standard & Poor’s 500 index.

The results are a surprise given the rush by hedge funds to short bank shares during the crisis in 2009.

Some funds recorded gains, however. The Renaissance Institutional Equities Fund, founded by mathematician turned hedge fund manager James Simons, gained 5.4 per cent in August, an investor said. The Renaissance Institutional Futures Fund gained 6.6 per cent in August, the same person added.

A spokeswoman for Man Group, the world’s largest listed hedge fund, said its AHL Diversified product was up 3.9 per cent in August.

“A general long positioning in bonds, interest rate products and gold help to produce stand-out returns”, she added.

Interest in shorting bank shares may have risen in the second half of the month, however. Recent figures from Data Explorers showed stock out on loan – an indicator of shorting interest – for financial stocks in the UK, US and Germany rose strongly since 12 August, when Spain, Italy, Belgium and France imposed shorting bans on some financial stocks.