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Alternative Market Briefing Weekly

Scepticism on hedge fund performance is growing: hedge fund news, week 52

Saturday, December 29, 2012

In the week-ending 28th December 2012, Future Capital Partners told FTAdviser it would be launching four enterprise investment scheme investments within entertainment and media, renewable energy, land allocation services and the alternative investment market.

The Parker FX index reported a +0.15% return for November 2012 (-1.53% YTD); The Morningstar MSCI Composite Hedge Fund Index went up 0.5% (est.) (4.8% YTD); And the Dow Jones Credit Suisse Hedge Fund Index finished up 0.64% (+3.27% YTD).

Hedge funds that invest in mortgage-backed securities gained 13.9% through November to make them the industry's best-performing strategy, according to the Absolute Return index; said the best performing hedge fund clones were two biotech funds, DAFNA and Ridgeback, followed by tiger cub Second Curve, a financials focused fund.

Sloane Robinson's flagship emerging markets fund is down 1.7% YTD after losing 17% last year, and the firm’s AUM is down to $2.5bn from a high of $15bn in ’08, said Reuters; RAB Capital saw its flagship fund lose 20% in November due to a losing position in an oil exploration company.

The Economist wrote a negative article about hedge funds’ performance in the last decade, pointing out the industry’s only trump card is its few star managers; Harold Ehrlich, adviser to JPMorgan's FoHF, told The FT that the reason for hedge funds’ underperformance is due to an addiction to momentum trading.

Forbes argued that John Paulson’s hedge fund firm, which assets grew to $36bn at the end of ’08 (and whose hedge funds were down 18% to 52% in 2011), is too big to manage; to which Value Walk retorted that if Paulson’s firm was too big to manage, Bridgewater (up 23% in 2011 and $120bn in AUM) and Brevan Howard (up 12% in 2011 and $34bn in AUM) would have lost too.

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