What’s in a name?
Bloomberg reports that the hedge fund industry is having a little problem:
U.S. hedge-fund managers may lose 15 percent of assets to withdrawals by year-end while their European rivals shed as much as 25 percent…Combined with investment losses, industry assets may shrink to $1.3 trillion, a 32 percent drop from the peak in June…Investors withdrew a record $43 billion from hedge funds last month. “There’s a bigger push by hedge funds to mitigate risk,” said Matt Simon…
It is said that “a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.” These hedge funds don’t appear to have hedged their bets very well. Perhaps they should have chosen a more appropriate name.
October 26th, 2008 at 5:42 pm
I have often wondered why no one had raised this point before– well done
October 27th, 2008 at 12:15 am
Iirc Yahoo! Finance was flogging this a few days ago. The linked Bloomberg article is terrible too. Of course, ‘Hedge Funds Experience Redemptions Despite Outperformance’ would be a less gripping headline than ‘Hedge Fund Withdrawals Stress Market; Citadel Reassures Clients’.
It opens with:
Aggravating a selloff…tsk, tsk, naughty, naughty. Record mutual fund redemptions…not mentioned.
“With the average hedge fund down 18 percent this year”, you’d think that Bloomberg might add that the typical mutual fund is down about twice that, as is the S&P 500. Bloomberg doesn’t.
I hope that the Bloomberg article is merely slovenly reporting and not the kind of agenda-driven “journalism” that is so flagrant this election year.