Hedge funds slip in September but stock funds fall more

2014-10-11

(Reuters) - Hedge funds finally have a little something to brag about, losing less money in September than the average mutual stock fund manager, according to data released on Tuesday.

The HFRI Fund Weighted Composite Index, a widely watched performance gauge for the $3 trillion global hedge fund industry, slipped 0.4 percent in September, a month when the S&P 500 index fell 1.4 percent. The average U.S. stock mutual fund manager lost 2.92 percent, Lipper data showed.

For months, hedge funds have come under fire for delivering lackluster returns as the broader stock market climbed and for charging hefty fees for middling results. Managers countered that their job, in part, is to insulate portfolios from big downturns, in which hedge funds would lose less money than everyone else.

Last month that happened when markets began selling off amid fresh worries about global growth and geopolitical problems.

So-called global macro hedge funds, made famous by investors including George Soros and which make big bets on currencies and the direction of interest rates, were the best performers in September. Many had bet on the dollar. The HFRI Macro Index gained 1.8 percent last month and is up 4.09 percent for the year-to-date.

Still, for the year hedge funds are lagging the broader stock market, returning 3.43 through the end of September while the S&P 500 gained 8.3 percent.

"The Macro resurgence accelerated in September, leading industry performance as equities, bonds and other hedge fund strategies declined," said Kenneth Heinz, president of Hedge Fund Research, which puts out the numbers.

"Macro hedge funds, including both trend following, quantitative as well as fundamental discretionary strategies, have re-emerged recently as powerful, uncorrelated exposures as U.S. stimulus measures are wound down and the U.S. economy continues to proceed toward interest rate normalization," he said.

Stock-oriented hedge funds lost 1.82 percent, suffering after a late-month selloff swept through the market. For the year, they are now up only 2 percent.

Most hedge funds guard their performance numbers even though they may anonymously report them to research companies like HFR that track returns.

Hedge fund investors who have money with a variety of funds reported mixed returns for last month.

Chase Coleman and Feroz Dewan's Tiger Global Management lost 7.2 percent, cutting its year-to-date gains to 13 percent. John Burbank's Passport Capital dipped 0.7 percent last month and is up 1.2 percent for the year. Daniel Loeb's Third Point slipped 0.3 percent and is up 6 percent for the year. On the upside, Kenneth Griffin's flagship portfolios at Citadel gained 4.35 percent and are up 14.8 percent for the year.

Investors still have a healthy appetite for hedge funds, adding $18.4 billion in August, according to data released by research groups TrimTabs and BarclayHedge on Tuesday. In the first eight months of the year, investors added $99 billion to hedge funds.