Hedge Funds Continue Weak Performance – Hiring Continues

Hedge funds reported another weak performance in October losing 1.9 percent for the month, slightly under performing the 1.8 percent decline in the Standard & Poor’s 500 Index. The October report reduced the hedge fund returns this year to just 1.1 percent, compared with a 13 percent gain in equities worldwide. Hedge funds that invest based on macro factors lost 0.6 percent in October. These funds have returned a negative 1.3 percent so far this year. Popular hedge fund manager John Paulson was among those that reported losses in October. Hedge fund winners that beat benchmarks in October include Citadel, SAC Capital and Third Point.

Net Hedge Fund Inflows Rose Modestly in October

Despite continued mediocre performance of hedge funds, the industry attracted more cash than what was withdrawn over the past month, according to the SS&C GlobeOp Capital Movement Index, which tracks monthly subscriptions and redemptions. Net inflows into hedge funds were 0.54 percent of the total during the month, compared to net outflow of cash in the prior month. However the net hedge fund inflow rate for October is well below the 2.01 percent of the total amount the industry attracted a year ago.

Image: TB Davies

Forward Redemption Request Rises

The number of hedge fund clients that requested forward redemption in November measured 5.19 percent, higher than the October figure of 3.19 percent. Hedge fund research firm SS&C Technologies’ CEO Bill Stone says that the higher forward redemption requests in November is likely due to investor rebalancing. Despite higher redemption figures in November, the forward redemptions request remains well below the peak of 19.27 percent in November 2008.

Some Hedge Funds Hiring Despite Weak Performance

Europe’s second-biggest hedge fund Brevan Howard Asset Management is among firms that are exploiting the abundant availability of hedge fund talent pool. Despite being on track for its second worst performance year, the London-based Brevan Howard is expanding its US operations. The hedge fund is continuing its hiring spree for its New York office. It has already added 14 people to its U.S. unit in the past five months.

Outlook for Jobs

There have been some pockets of good news of late, with funds such as Brevan Howard doing selective hiring even when the performance is mediocre. This suggests that at least a few hedge funds see the current job market scenario as conducive to hiring quality talent. But given the recent continued weakness in the performance of hedge funds, coupled with higher forward redemption requests, the recovery in the hedge fund job market may be a long way off from taking hold.

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