Hedge funds lost 5.02% for the third quarter of 2011 according to research by Bank of America Merrill Lynch. This is the largest decline since the third quarter of 2008 when they fell 9.48%. Much of the losses were caused by the sell-off in August after US debt was downgraded and by the European debt crisis and commodity price collapse in September. The stock markets have continued to fall in October. Commodity Trading Advisors were even for September and they were the best performing hedge fund strategy. Equity long/short was down 4.76%.
On the other hand, Red Kite Capital Management's commodity fund is up 47% year to date benefiting from a large short position in copper. It was up 19% in August and 17% in September. The short position was established based on a contrarian idea that Chinese demand for copper would slow down.
Sources for this article can be accessed at Reuters and www.hedgeworld.com.
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