Hedgies fail to beat falling share prices

MOST hedge fund strategies were wrong-footed by plunging stock markets in August, according to data released yesterday.

The EDHEC Risk Institute, which tracks the performance of hedge funds, said managers following a short-selling strategy were the only ones to post significant gains last month, with an average return of 6.97 per cent.

Short sellers benefited from falling share prices, with the S&P 500 index suffering a 5.43 per cent loss, its most severe since May 2010.

Convertible arbitrage funds posted an average loss of 2.09 per cent in August, as falling convertible bond prices and a shrinking credit spread took their toll.

Event driven funds lost 3.78 per cent on average; long short equity funds were down 4.07 per cent; and distressed securities funds were off 4.08 per cent. However, all managed to outperform the wider stock market.

Commodity trading adviser funds, which try to play the technical factors in different niche markets, also eked out a tiny gain of 0.27 per cent.

The funds of funds strategy also outperformed the stock market with an average return of -2.57 per cent, the EDHEC Risk Institute said.