Hedge funds fail to keep pace with Friday's rally
LONDON, Sept 23 (Reuters) - Hedge fund returns received a much-needed boost on Friday as markets soared but they were unable to keep pace with the FTSE 100's .FTSE record rise as short positions in banks held back performance. Hedge funds rose 1.49 percent on Friday, according to data released on Tuesday from Chicago-based Hedge Fund Research's HFRX Global Hedge Fund Index.
Equity hedge funds gained 2.56 percent, while event-driven funds, which bet on corporate activity and tend to have high equity exposure, returned 1.88 percent, the data also showed.
However, these returns were well behind the 8.8 percent surge in the FTSE 100 index, the biggest daily gain in its 24-year history, after news of the U.S. government's plan to mop up billions of dollars in toxic mortgage debt and temporary bans on short-selling financial stocks in the U.S. and UK.
The subsequent surge in bank stocks, some of which gained as much as one-third, caught out many hedge funds who had been shorting the battered financials sector and cancelled out some of their gains from holding other stocks that rose.
Shorting means betting on lower prices for a security in the future. While the rally was a welcome boost, hedge fund performance so far this year will continue to disappoint many investors who had expected positive returns in all market conditions.
So far this month funds have fallen 3.49 percent, while the year-to-date loss is 8.37 percent, according to the HFRX index. However, there is anecdotal evidence that some managers in strategies such as managed futures, which bet on trends in global futures markets, are profiting.
"I know of short-term CTAs (commodity trading advisers, another name for managed futures) who are able to capture short-term moves in markets. It's a very good environment for them," said one fund of hedge funds manager who asked not to be named to avoid drawing attention to their firm.
According to the Credit Suisse/Tremont index, managed futures strategies are up 7.3 percent in the first eight months of the year, one of only five strategies to make money so far this year. (Editing by Victoria Bryan)
