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Lyster Watson Hedge Fund Strategy indices suffered losses accross the board in August

Friday, September 16, 2011
Opalesque Industry Update - Reports from just over 1/3 of hedge funds in Lyster Watson's universe show that hedge funds suffered large losses across the board in August.

Declines in equity strategies, while only about half of their long-only counterparts, exceeded 4% in all geographic regions and drove year-to-date performance below zero percent. Fears of a return to recession drove down the prices of high yield bonds and caused credit and distressed managers to post losses, as well. Volatility Arbitrage managers failed to benefit from the sudden shift in the direction of volatility and lost more than even equity managers. Only Macro managers found a way to benefit from the carnage, as they posted their second consecutive gain in an otherwise difficult year.

Months like August 2011, in which almost all funds experience significant losses, usually cause managers to adopt more cautious positions. While this protects them from more severe losses in the future, it also prevents them from recovering losses as quickly as they accrued them if market conditions improve. This suggests more muted results for September irrespective of the direction of equity, credit, and commodity markets.

Lyster Watson Hedge Fund Strategy Indices are a series of non-investable benchmarks designed to be representative composites of randomly generated portfolios of hedge fund strategy peers, factoring in both volatility and return.

(presss release)

Performance tables: Source

BG

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