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Hedge Funds Posted Their Worst Performance In 2008

arned positive returns.

All hedge fund strategies, with the exception of CTAs and short sellers, posted their worst losses in 2008, according to a publication from France’s EDHEC Risk and Asset Management Center.

EDHEC provides a strategy-by-strategy account of the performance of each hedge fund strategy included in the EDHEC Alternative Indexes.

The extraordinary events of 2008 had a significant impact on hedge fund returns, stated Veronique Le Sourd, senior research engineer at the EDHEC Risk and Asset Management Center who is quoted in the release.

Fund of hedge funds, which are sometimes taken to give an aggregate view of the industry’s performance, performed very badly in 2008, with a negative return of -17.08. This is the first time since 1997 that this index has posted negative returns.

In 2008, the S&P 500 fell 37 percent, which is the highest one-year fall for the fall where data is available. Emerging markets were hit with even worse returns. The S&P IFCI Index, which includes twenty-two emerging markets, fell by about 54 percent in 2008

The months of September and October were major contributors to the negative performance of all strategies. But other months contributed as well to the negative returns as most strategies racked up more negative than positive months. Six of the strategies, namely, Convertible Arbitrage, Distressed Securities, Emerging Markets, Event Driven, Fixed Income Arbitrage and Fund of Funds), posted negative returns for as many as nine months in 2008.

However, CTA Global and Short Selling, posted strong returns, only slightly lower than their best returns. Short selling was the best performing strategy with a return of 24.72 percent. Emerging markets produced the lowest return of -30.30 percent, while Convertible Arbitrage closely followed with a return of -26.48 percent.

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