August hedge fund losses may be lighter -investors

BOSTON, Sept 7 (Reuters) - Hedge fund manager Clifford Asness, who oversees $10 billion at AQR Capital Management, told investors last month that rumors of severe pain at his fund were simply false.

Based on what others in the business are saying, that statement might even hold true for the global $1.9 trillion hedge fund industry as a whole. After bracing for heavy losses, investors may be surprised to see the month wasn't as bad as feared when performance numbers come out early next week.

"Things look a lot different at the end of the month than they did at the beginning and during the middle when people really were suffering big losses," said a hedge fund investor who is familiar with many funds' performance, but asked not to be named. "Now I think we are going to see much smaller losses than initially expected."

At mid-month, Moore Capital's Emerging Market fund was down 9.5 percent, the Hermitage Fund had lost 11.8 percent and Tykhe Portfolios Ltd Class C was down 26.5 percent, according to people who had seen their numbers.

While August hedge fund numbers will likely show the first losses this year, analysts put the losses at closer to 1 percent instead of the 3 percent or 4 percent some investors had anticipated late last month.

The Barclay Hedge Fund Index, which tracks performance at thousands of funds, said the 893 funds that have already reported August data suggest the index lost 1.53 percent. Yet analysts point to academic studies that show funds which performed poorly tend to wait until the last minute to report.

Other performance trackers like the Hennessee Group and Hedge Fund Research are expected to release their numbers early next week. Because hedge funds are only loosely regulated, they are not required to tell anyone how they performed.

If the average hedge fund lost roughly 1.5 percent, as analysts now forecast, it would weigh on the overall average 2007 return, which had been up nearly 9 percent through July.

But that would be no worse than the 1.56 percent loss in May 2006 when more than 70 percent of all hedge funds lost money due to sharp declines in metals, oil and stock prices, according to Hedge Fund Research data.

Analysts and investors acknowledge that returns for individual fund strategies, particularly among managers who invested in financial stocks and played heavily in the credit markets, will look worse.

But even at these funds, people said projected losses might be a touch exaggercted. A person familiar with quantitative hedge funds' performances said last month even these types of funds had recovered about half what they lost over the month.

(Additional reporting by Dane Hamilton in New York)