Hedge funds lose ground in August

Hedge funds lost 1.31% in August, marking the first negative returns since July 2006, according to Hedge Fund Research Inc. Emerging Markets, High Yield and Macro strategies all lost ground, according to HFR. Fixed Income strategies fell in August, with Fixed Income: Diversified and Fixed Income: High Yield falling by 1.55% and 1.97%, respectively. Emerging Markets were the weakest area of hedge fund performance, despite gains in strategies focusing on China. Funds focused in Latin America and Russia/Eastern Europe posted declines of 2.93% and 3.89%, respectively. Macro strategies fell 2.18%, on poor results in Commodity Trading Adviser, Emerging Market and discretionary macro strategies. Short Selling strategies posted the third consecutive positive month, with a gain of 1.29% bringing the total three-month gain to nearly 11%. The streak follows ten consecutive negative months for the strategy. Despite increased volatility during the past month related to the collapse in the subprime-mortgage industry, Ken Heinz, president of HFR said that there is no specific line item that can denote what role subprime mortgages played the decline. HFR also reported positive fund flows for the end of July, with industry assets under management increasing by $16.8 billion to a record $1.76 trillion.