Canadian Investment Review

Which Hedge Funds Shone in September?

Written by Reuters on Monday, October 10th, 2011 at 9:02 am

story_images_high five bear(Source: Reuters) A select band of shrewd hedge fund managers have avoided September’s market pitfalls to post healthy profits, even as Europe’s deepening debt crisis leaves much of the $2 trillion industry nursing painful losses.

Bearish macro bets such as owning U.S. and European government bonds, as well as being short equities, commodities and the euro, have helped funds navigate a crisis that has seen fears of a global recession and a banking crisis grow.

Brevan Howard’s $25 billion Master fund, one of the world’s biggest hedge funds, gained 1.5 percent last month to September 23, said two sources who had seen data on the fund’s performance. This takes profits this year to 12.3 percent.

And GLG, part of Man Group (EMG.L), saw its $2 billion Atlas Macro fund, which is managed by Driss Ben-Brahim and Jamil Baz, gain an estimated 6 percent in September, said a person close to the company.

In contrast, the average hedge fund lost 3 percent last month, according to Hedge Fund Research’s HFRX index, taking year-to-date losses to 8.4 percent. The third quarter was the worst for three years.

Equity funds were hard hit, particularly those focusing on stocks’ fundamental value, with MSCI’s World index of stocks .MIWO00000PUS falling a further 8.8 percent during the month.

A number of industry insiders have pointed to markets being preoccupied with economic worries, rather than company fundamentals.

“This is not 2008, but perhaps one similarity with 2008 is that market’s focus is on macro, and no-one is really focusing on the micro,” said Frank Frecentese, global head of hedge fund investments at Citi Private Bank.

EQUITY, CREDIT FUNDS

Global macro funds — made famous by the likes of George Soros — have tended to be more bearish than equity managers and have benefited from falling bond yields in countries such as the United States, Germany and the UK.

On Thursday the Bank of England announced a further 75 billion pound stimulus, pushing yields on longer-dated debt to record lows.

Stenham Asset Management said its Trading fund, which invests in macro hedge funds, gained an estimated 0.8 percent in September, taking third-quarter gains to 3.4 percent.

Meanwhile, a smattering of equity managers were able to profit, even as markets fell.

Marshall Wace’s $1 billion Eureka fund, managed by co-founder Paul Marshall, gained 1.5 percent in September, taking gains this year to 5.8 percent, said a source familiar with the matter.

And its Global Opportunities fund, which is run by Fehim Sever and which focuses on emerging markets, rose 6.5 percent last month, lifting this year’s profits to 23.8 percent.

Among credit funds, CQS, one of Europe’s biggest hedge fund managers, saw its Credit Long-Short fund, which is managed by Simon Finch, gain 1.7 percent in September, taking year-to-date gains to 7.9 percent.

This was helped by active trading of both long and short positions, according to a source familiar with the matter.

And while GLG’s Emerging Markets fund has suffered this year, its Emerging Credit Opportunities portfolio gained 1 percent last month.

(Reporting by Laurence Fletcher. Editing by Chris Vellacott and Will Waterman)

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