Prominent hedge funds nurse heavy losses in 2008

By Svea Herbst-Bayliss

BOSTON (Reuters) - Recent stock market drops hurt some of the world's most famous hedge fund managers, who have long attracted money with promises that they could sidestep even the worst conditions.

Bruce Kovner's Caxton Alpha Equity fund, Lee Ainslie's Maverick Fund and Leon Cooperman's Omega fund rank among the $2 trillion hedge fund industry's prominent losers in the first days of 2008, according to people who have seen the numbers.

The average global hedge fund lost 3 percent through the end of last week, according to Hedge Fund Research data, and that was before global markets plunged on Monday, when indexes fell 7.2 percent in Germany and 7.4 percent in India. U.S. markets were closed on Monday.

U.S. hedge funds specializing in stocks were off 5 percent on average through last Friday, according to data from New York-based Hennessee Group, which invests in hedge funds and tracks their performance.

"This month is going to be the worst start to the year for hedge funds in a very, very long time," said Charles Gradante, a principal at Hennessee.

In fact hedge funds, loosely regulated portfolios that became hugely popular with endowments and pension funds over the last decade on promises to protect against declines, have never lost more than 1 percent in the first month of the year since Hennessee began tracking the data in 1993.

Hedge funds, unlike mutual funds, are not required to report returns and the first indication of the industry's performance for the start of 2008 won't be known for at least two weeks.

Now 2008 promises to be different at the start, the middle and the end of the year, industry analysts and investors said. They did note that so-called short sellers, who bet exclusively on stocks falling, are having a good year, building on their average 9.6 percent return last year as recorded by Hennessee.