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The media, investors (both retail and institutional) and arm chair economists tend to look at the world one month at a time. The world is billions of years old, a monthly outlook is thinking small. Trust me on this. I bring this up because I want to illustrate the point that monthly drawdowns will happen. It's a fact of life, particularly in volatile markets such as this. Taking that into consideration, one should pretty much disregard the monthly peformance rhetoric you see in the media in regards to hedge funds. If you have a pressing need to access your money on a month to month basis, alternative asset investing is not for you. Year to date, and 1 year stats hold a little more water, though. Personally, one should be prepared for down years as well, particularly when dealing with volatile assets and illiquid markets. After all, that is where the outsized profits usually lie - in bed with the outsized risks. With that said, let's look into this Bloomberg article today:

Maverick Capital Ltd., Greenlight Capital LLC and The Children's Investment Fund Management LLP fell more than 12 percent in September as stock hedge funds posted record monthly losses and braced for client defections.

Lee Ainslie's Maverick Capital declined 19.5 percent and Greenlight Capital, run by David Einhorn, was down 12.8 percent, according to investors in the New York-based funds. Children's Investment, overseen by Chris Hohn in London, fell 15 percent, based on a preliminary estimate.

Stock hedge funds fell an average of 8.6 percent in September, the biggest one-month loss since Hedge Fund Research Inc. began collecting data in 1990. While that was better than the 12 percent decline by the MSCI World Index, a benchmark for global stocks, industry analysts expect investors to increase their requests to pull money from funds....

Other managers with above-average losses for the month included Stephen Mandel, whose main Lone Cyprus fund in Greenwich, Connecticut, fell 14.7 percent. New York-based Third Point LLC, run by Daniel Loeb, dropped 11 percent....

Defense Doesn't Work

Funds in all investment categories fell 6.9 percent in September, according to Hedge Fund Research's Global Hedge Fund Index. That's the worst month for the $1.9 trillion industry since August 1998, when the Russian debt default triggered the collapse of Long-Term Capital Management LP.

The losses came even as many managers sought to sidestep the tumble in equity prices by holding more cash, cutting borrowing and reducing their bets on stocks expected to rise.

Restrictions on shorting stocks in the U.S. and U.K. put in place on Sept. 18 hamstrung funds that could no longer bet on falling prices of 15 percent of the companies in the Standard & Poor's 500 Index. Energy and materials shares, which many hedge funds had been expecting to rise, were some of the worst performers in the month, with the S&P 500 Materials Index down 17 percent and its Energy Index down 12 percent.

Price swings also made trading difficult, investors said. The S&P 500 rose or fell more than 4 percent on six trading days in the month, compared with once in the previous eight months.

``Funds have suffered from volatility that has quadrupled and a lot of that is related to the short ban,'' said Brad Balter, managing partner of Balter Capital Management LLC in Boston, which farms out money to hedge funds...

Below are selected hedge-fund returns for September and the year-to-date. 


	Fund                      Sept. (%)            YTD (%)
Maverick                  -19.5               -21.2
TCI                          -15                  -26
Greenlight Capital   -12.8               -16.4
Lone Cyprus            -14.7               -26.5
Third Point               -11                 -18.4
Atticus European    -15.8                -43.5
Atticus Global          - 2.8                -27.2
Source: Investors

Now, looking at the BoomBustBlog research model...

 

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Year to date:

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The closest runner up is the Short Equity Bias index, with a mere 27% of the blog's research model performance. See this post for full performance details and documentation. I make these comparisons in an attempt to illustrate how extremely competitively priced the blog's research subscriptions are. I know it is a little self serving, but the truth is the truth.