Bloomberg has a lengthy report today on the performance of hedge funds during the second quarter, a stretch that included the months of May and June that were not kind to stocks.
Hedge-fund managers, Wall Street’s best compensated and supposedly smartest investors, are dazed and confused.
Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers.
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Hedge-fund managers, who oversee $1.67 trillion in assets, are reluctant to put money to work as they are buffeted by a wide range of often conflicting political and economic forces, from fiscal policy in Europe and the U.S., to what regulations will be imposed on the financial-services and energy industries, to the growth prospects in China. In turn, smaller and fewer trades may make it harder for funds to rebound from losses incurred since May, when the industry suffered its worst decline in 18 months.
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Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said last week he sold about half his stock investments because of concern governments around the world are curtailing stimulus measures too soon.“I’m not wildly bearish, but I don’t want to have a lot of risk at this point,” Biggs, who manages $1.4 billion, said in a telephone interview. “I’m not putting my money into anything. I’m raising cash.”
Borrowing is down and cash holdings are up, making you wonder about the industry’s future. After losing 19 percent in 2008 and gaining back 20 percent last year (for a net decline of three percent), hedge funds were down 1.2 percent during the first half.
