Hedge funds returned negative -2.7% in November, bringing their year-to-date decline to 18%, according to the Hennessee Hedge Fund Index, The Wall Street Journal reports. While the decline is painful, it is at least less than the -5.5% loss in October and the double-digit declines in the Standard & Poors 500 Index, the Dow Jones Industrial Index and the Nasdaq.
Still, declines across the board are causing headaches for mutual fund and hedge fund managers alike. While many managers are seeing attractive investment opportunities, many are struggling to retain investors and their capital bases, said Charles Gradante, co-founder of the Hennessee Group.
Faced with excessive redemption requests, hedge funds are likely to return between 15% and 26% of investors assets this year, despite gates set up to quell or delay redemptions, Gradante said. Those without such controls could lose even more money, between redemptions and market declines, he added.
When you consider the number of liquidations, redemptions and the negative performance of hedge funds this year, it is possible that the entire hedge fund industry could start 2009 at 40% of the size it was at the beginning of 2008, Gradante said.