Still-beleaguered hedge funds would love to have the problem facing Wall Street: the public relations nightmare of explaining its gargantuan bonuses. Despite widespread and sizeable gains in 2009, only half of all Americas-based hedge funds are likely to get paid for their recent work as many continue to recover from 2008 losses. Such brand names as Citadel Investment Group are still yanking their flagship funds from the mire, but the pain is felt by many more less-than-famous managers and their investors.
The final numbers for 2009 will reveal the extent of the carnage, but based on October numbers, 49% of hedge funds in the Absolute Return database remained below their high-water marks through October 31. While November produced gains for most funds and December appeared to be similarly positive when AR went to press, these underwater funds would have had to earn an additional return of 14% by yearend to return to their high-water marks. (That’s the median fund. The average gain necessary was 27% given the wide dispersion in returns.)
The healthiest funds were those running convertible & equity arbitrage stategies, with 78% of these funds having exceeded their high-water marks. Fixed-income and mortgage-backed securities funds were nearly as strong, with 70% and 68% of funds, respectively, above their high-water marks.
The strategies in the worst shape were managed futures funds, 65% of which were below their high-water marks.
U.S. equity funds, the largest strategy in the Absolute Return database, remained substantially injured, with only 37% of these funds above their high-water marks.
Josh Friedlander
WHO’S OVER THE HIGH-WATER MARK?
Strategies | Above HWM |
Managed Futures | 35% |
U.S. Equity | 37% |
Technology | 45% |
Global Equities | 46% |
Commodities | 50% |
Event Driven | 50% |
Composite | 51% |
Macro | 55% |
Distressed | 60% |
Credit | 64% |
Mixed Arbitrage | 67% |
Multistrategy | 67% |
Mortgage-backed Securities | 68% |
Fixed Income | 70% |
Convertible & Equity Arbitrage | 78% |
