September socks hedge fund performance

Hedge funds had their worst month in a decade in September because of short selling restrictions, the liquidity crunch and stock volatility, according to Hennessee Group LLC, which tracks the hedge fund industry. “September 2008 will prove to be one of the most challenging months in the history of hedge funds,” Charles Gradante, managing principal of Hennessee Group, said in a statement. Hedge funds slipped 5% to 9% for the month, though they “outperformed the broad equity markets on a relative basis.” The Standard & Poor's 500 stock index declined 9% during the month, and the MSCI World Index fell 12%. Hennessee attributed the poor performance to the Securities and Exchange Commission’s restrictions on short selling, which were put in place in the middle of last month. Additionally, the firm attributed the drop to the credit markets being driven by “fear and [lack of] liquidity, rather than fundamentals, leading to a very challenging environment for hedge fund managers.”