Hedge funds lose money again in October: data

BOSTON (Reuters) - Hedge funds lost an average 5.52 percent in October, marking their fifth consecutive monthly drop as managers faced sharp stock market swings and angry clients who demanded their money back, new data shows.

The average hedge fund has now lost 15.30 percent in the first 10 months of 2008, putting it in line to post its worst year ever, according to data released by hedge fund performance trackers at the Hennessee Group.

Data from Hedge Fund Research, released on Friday, shows similar results with the average fund down by 5.43 percent in October, leaving it down 15.48 percent this year.

The month was especially bad for hedge funds because many were faced to sell off holdings at fire-sale prices to return money to investors who are submitting redemption requests.

Hedge Fund Research said the industry's only unprofitable year was 2002, when the HFRI index lost 1.45 percent and the S&P 500 dropped 23 percent.

While investors had braced for heavy losses for October, the declines are still shocking to investors who entrusted millions to managers who often promise to make money in all markets, industry analysts said.

Hedge funds specializing in emerging markets and convertible arbitrage strategies delivered the biggest losses and contributed to pulling the overall index down, data from Hennessee showed.

As expected, funds that specialize in betting that stock prices will fall fared well, rising 10.57 percent in October.

(Reporting by Svea Herbst-Bayliss, editing by Matthew Lewis)