Wednesday, November 19, 2008
Hedge funds took hit in Oct
Nov. 19 (Bloomberg) -- Money manager John Paulson has started buying beaten-up mortgage bonds as hedge funds stumbled for a fifth straight month. Paulson, 52, is purchasing debt backed by home loans after generating sixfold returns last year with help from bets against subprime mortgages, investors in his funds said. Paulson's Advantage Plus fund rose 29 percent this year through October, while the Eurekahedge Hedge Fund Index, which tracks more than 2,000 funds that invest globally, dropped about 12 percent. ``Paulson's timing is typically very good,'' said Louis Gargour, chief investment officer of LNG Capital LLP, a London- based hedge fund that invests in distressed credit markets. The $1.65 trillion hedge fund industry is enduring its worst period in at least eight years as global declines in stocks and commodity prices led to investment losses and customers withdrew a net $62.7 billion from the funds last month, Singapore-based Eurekahedge reported. Assets may fall to about $1 trillion by the middle of next year, analysts at New York-based Citigroup Inc. estimated in a report published earlier this week. ``Hedge funds will probably face more redemptions for a while,'' said Akihiro Nishi, executive director at Tokyo-based Mitsubishi Asset Brains Co.'s investment advisory division. The average hedge fund followed by Eurekahedge fell 4.5 percent last month, compared with the 19 percent drop in the MSCI World Index and the 22 percent slump in the Reuters Jefferies CRB Index, a benchmark for commodities.