HFN Aggregate Average Down for August

Early estimates from the HFN Hedge Fund Aggregate Average is -1.26% for August of this year. The decrease was the largest since May 2006 and was the first month since May 2007 that the average hedge fund underperformed equity markets.

Year to date through August the average hedge fund is +6.28% while the S&P 500 TR is +5.20%. The HFN database consists of over 7,600 current hedge fund, fund of funds, and CTA products. HFN is an equal weighted average of all single manager hedge funds and CTA/managed futures products in the HedgeFund.net database.

Unlike previous months when equity markets fell and hedge funds outperformed, the environment in August proved more treacherous for managers.

Although major US equity markets ended August positive and European markets rallied to month end, the big drops and volatility during the month combined with widening credit spreads resulted in the majority of hedge fund strategies being negative in August. The HFN Fixed Income Arbitrage Average, perhaps the most representative benchmark of the difficulties caused by the global credit squeeze, experienced its worst month since October 1998, -2.39% and is +0.71% YTD.

August was not painful for every hedge fund strategy. Managers running option strategies benefited from the increase in volatility, returning an average of +1.44% in August and the HFN Options Strategies Average is +6.32% YTD. Short biased managers produced positive returns for the third straight month, +1.04% in August, a feat matched only three times in the last four years and the HFN Short Bias Average is +1.21% YTD.