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By Drago Indjic, Sunningdale Capital's co-founding partner and Project Manager at the London Business School:

It appears that Christmas came early for all underperforming funds offering longer than "monthly + 30 days notice" redemptions. Tomorrow, the last window of opportunity to redeem hedge funds will be closed and since major broad hedge fund indexes are expected to be in "high single digit" negative territory, many will say that 2011 calendar year losses have been inevitable.

Are managers still rewarded for pursuing "absolute" returns? Regardless of type of explanations for losses, many discussions will involve "relative" performance against investable indexes and/or peers. In particular, diversified FoHF performance will have to be compared principally against the broad hedge fund market. There is little need for verbosity on probable causes of losses since here we are looking for treatments: have investors had access to any cure?

It is recognised that the third quarter of 2011 was one of the worst ever quarters for hedge funds. Obviously, most losing FoHF followed the market wide losses through their natural "long" market position. We should accept that investing in hedge funds does not guarantee absolute returns. In addition, most managers had the benefit of the relatively fresh experience of September 2008 and the opportunity to adopt to survive the next crisis. Moreover, market instruments and liquid......................

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