Turmoil hits Lansdowne as hedgies falter

MORE evidence of the struggles of the hedge fund industry has emerged as Lansdowne Partners admitted recording losses of up to 20 per cent at two of its key funds.

Lansdowne, which manages $13.3bn (£8.31bn) and is one of many City institutions to have hired Tony Blair after he left Downing Street, has been caught out by rising investor concern over the political risk in global banks.

The UK Equity fund, Lansdowne’s largest with $7.8bn of assets under management, is down 15.6 per cent in the 10 months to the end of October, a stark contrast to its average annual return of 14.85 per cent in 10 years since it was set up.

Its long-only $490m UK Strategic Investment fund has been hit harder and is down 20.4 per cent so far this year, continuing a weak performance since 2007.

Lansdowne, which made millions of pounds by shorting banking stocks such as Barclays and Anglo Irish Bank during the crisis, is seen as one of the best-connected funds.

Last year it hired Blair to give a small number of geopolitical talks to its executives and co-founder Paul Ruddock and fund manager David Craigen have both donated to the Conservative Party. In July Lansdowne sold its $850m stake in Goldman Sachs.

The average hedge fund globally gained 0.8 per cent in October, leaving it down 7.7 per cent for the year after a volatile summer that has damaged performance across the industry, according to Hedge Fund Research’s HFRX index.

The FTSE 100 index was, in contrast, up 8.1 per cent over the month.

Roberto Botero, director at Sciens Capital Management, which runs $3.7bn in hedge fund assets, said managers had adopted “fairly conservative” strategies over the quarter, saving their money so it can be allocated when turmoil has eased.