| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Hedge funds down on average up to 16.60% in October - about half the decline in equities
By Finfacts Team
Nov 11, 2008 - 6:51:23 AM

Email this article
 Printer friendly page

Fischer Black and Myron Scholes revolutionized the financial world by introducing the Black/Scholes Option Pricing Model. This model, or equation, allows an investor to determine the fair value of a financial option, such as a call. [A call gives its owner the right to buy 100 shares of stock at a specified price, e.g. $50, within a specified time period, like a few months.] Since virtually all financial securities have some characteristics of financial options, the model was a breakthrough in properly valuing securities and became a popular part of hedge funds' tool kit

They won the Nobel Prize in Economics in 1997 for developing the model.

Scholes said last July that innovation rather than regulation was the best medicine for averting further crises. He said financial shocks had a positive impact by forcing people to examine the failure of previous models - - he is unlikely to have the pleasure of joining a dole queue. “From chaos comes a new learning. Innovation results from chaos,” he said. ”I’m pessimistic in the short run, but very optimistic going forward.”

Platinum Grove Asset Management, the hedge-fund firm co-founded Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29% in the first half of October. Robert Merton, who was a co-winner of the 1997 Nobel prize and co-founder of the defunct hedge fund Long-Term Capital Management, which triggered a crisis in 1998, shut down a fund last August after three months because it did not raise enough money.

Hedge funds as measured by both the Greenwich Global Hedge Fund Index (GGHF) and the Greenwich Composite Investable Index (GI2) declined marginally when compared with global equity returns during the month of October. The GGHFI and GI2 posted declines of -5.06% and -8.53% on the month, respectively, compared to global equity returns in the S&P 500 Total Return (-16.79%), MSCI World Equity (-19.05%), and FTSE 100 (-10.71%) equity indices. Year-to-date, the GGHFI and the GI2 have shed -14.29% and -16.60%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -32.84%, -39.75%, and -32.21%, correspondingly. 36% of constituent funds in the GGHFI ended the month with gains.

“October’s returns are the result of similar market conditions that impacted hedge funds in September. Although long/short equity funds were notably lower, other event driven and arbitrage funds that trade in more illiquid securities were also negatively affected due to redemptions and forced selling,” Margaret Gilbert, Managing Director of Greenwich Alternative Investments said.

Long/Short Equity managers experienced roughly half the losses of global equity markets during October, losing -7.88% on average. Value funds performed slightly better than Growth oriented managers, but both declined -8.91%, and -10.42%, respectively. Short Selling managers continued to take advantage of weak equity markets, producing their best month to date, with funds advancing +11.06%. Year-to-date, Short Selling funds have gained more than 25% and remain the best performing subsector of hedge fund strategies.

Market Neutral funds once again felt the effects of illiquid credit markets during the month of October, falling by -4.59%. Convertible Arbitrage managers suffered their worst month to date, losing -19.96% as redemptions and forced selling worsened an already unstable market for convertible bonds. Fixed Income and Other Arbitrage managers performed better, but still lost ground on the month, falling by -5.31% and -2.26%, respectively. Event Driven managers were dragged lower by distressed fund managers in particular, as they declined -8.63% on the month.

For the second month in a row, Directional Trading managers moved higher, capitalizing on volatile commodity markets. These funds were up on average by 4.88%. Futures managers turned in another strong month, advancing by 6.61%. Macro managers showed mixed results, with the average return down -0.30%.

Specialty Strategy managers were the weakest performing strategy group for the month of October, with funds losing -10.58% on average. Emerging Market funds suffered one of their worst months on record, losing -15.19% due to dramatic declines in BRIC equity indices.

Hedge Fund losses for the full year 2008 are expected to be the biggest on record.

Last month, Huw van Steenis, a Morgan Stanley analyst in London, said  requests by investors for withdrawals may reach 15% of assets in the US and 25% in Europe. Combined with investment losses, industry assets may drop by 24% to $1.3 trillion in the fourth quarter, van Steenis said.

Credit Suisse estimates that 30% of roughly 8,000 hedge funds over the next few years will close.

Finfacts Report:  Hedge Funds falter as big shakeout underway; Over 9,000 employed in administration in Ireland

Related Articles
Related Articles


© Copyright 2009 by Finfacts.com

Top of Page

International
Latest Headlines
Wednesday newspaper review: December 17, 2014
Tuesday newspaper review: December 16, 2014
Monday Newspaper Review - Irish Business News and International Stories - - December 08, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 28, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 27, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 25, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 21, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 20, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - November 19, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 18, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 17, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 14, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 13, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - November 12, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 11, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 10, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 06, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 04, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 03, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 31, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 30, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 29, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 28, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 24, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 22, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 21, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 20, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 17, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 16, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 15, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 13, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 10, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 09, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 08, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 07, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 06, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 02, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 01, 2014
Monday Newspaper Review - Irish Business News and International Stories - - September 29, 2014
Friday Newspaper Review - Irish Business News and International Stories - - September 26, 2014