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Alternative Market Briefing

Short-term traders survive October's hedge fund bloodbath

Thursday, November 08, 2018

Bailey McCann, Opalesque New York:

October was the worst month for hedge funds in seven years, according to the latest performance data from Hedge Fund Research. The HFRI Fund Weighted Composite Index fell -2.98 percent in October, the worst monthly decline since September 2011. The majority of hedge fund strategies ended the month in negative territory, in some cases continuing a trend that started in September.

The steep drop in performance has left some investors skeptical about the overall value proposition for hedge funds. At Agecroft Partner's Gaining The Edge conference this week in New York, allocators said from the stage that hedge funds were failing to preserve capital or provide crisis alpha. They also noted that managers have been saying for years that once volatility returned hedge funds would do better - an argument that was roundly refuted with poor performance in both October and February of this year. "I think as investors we're really looking at the next 12-24 months as the make or break period for hedge funds," said Paul Zummo of JP Morgan Asset Management, during a panel on hedge fund investing. He added that if performance doesn't bounce back, it will be harder to see what the exact use case is for hedge funds.

Still, there may be a small silver lining for investors if they have focused on manager selection. A deeper dive into October performance shows a significant dispersion of returns across almost all strategies. According to ......................

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