Hedge fund leverage: Batten down the hatches
Speakers at the EuroHedge Summit offered sound advice: leverage addicts were warned about the drug’s potency, and panickers were advised to panic in good time. Neil Wilson reports from Paris.
It was a gruesome first quarter for many hedge funds. On average, hedge funds globally dropped by more than 1.2% in March, to leave them down by an estimated average of 1.66% for Q1 as a whole, according to the HedgeFund Intelligence Global Index. But there were plenty of areas where the falls were much greater than the average.
Hedge funds in Asia were particularly hard hit, with the average fund dropping 2.52% in March to leave the AsiaHedge Composite down an estimated 5.36% for the first quarter. This was still significantly better than the Asia-Pacific equity markets – with the MSCI Pacific Free Net index dropping 9.57% over the same period. But it was obviously not a great performance – even after what was a very good year for Asia-Pac funds in 2007. And there were some particularly weak returns in Q1 among the single-country funds in India, China and Australia; in all those places, average long/short funds are now under water by more than double-digit amounts for the year to date.
In Europe, the picture overall is a little rosier – with strong returns from many macro and managed futures funds helping to boost the EuroHedge Composite, leaving it down by only 1.02%