Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
February 04, 2008 12:00 AM

Shorting stocks was the way to go for hedge funds in the fourth quarter

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    CHICAGO — Shorting equities was by far and away the most profitable strategy in the fourth quarter, according to performance data from Morningstar Inc.’s hedge fund database.

    The average performance of 13.23% by managers in Morningstar’s Short Equity hedge fund was nearly eight percentage points more than managers in the next highest category, Global Trend managers, where the average was 5.38% in the fourth quarter.

    By shorting equities, managers in the best-performing sector avoided negative returns of every major equity index in the fourth quarter as well as the 3.0% return of the Lehman Brothers U.S. Aggregate Bond index. The S&P 500 was down 3.33% in the quarter, the Wilshire 5000 index was down 3.22%, the Russell 2000 index was down 4.6% and the Morgan Stanley Capital International Europe Australia Far East index was down 2.04%.

    Average performance across all 17 of strategy categories was 1.64% for the quarter. Emerging Market managers averaged 4.3%, while Global Non-Trend (mainly global macro fund) managers averaged 4.23%. Average returns of the other 13 strategy categories were less than 2%, with three categories dropping into negative territory — Corporate Action managers, which averaged -0.08%; Multistrategy funds, which averaged -0.85%; and Developed Asia Equity funds, which were down an average of 1.28%.

    (See charts of top performing hedge funds and top performing hedge funds by category.)

    Daniel V. Farkas, Morningstar’s resident hedge fund analyst, said what struck him most about aggregate returns was that most strategies were positive, indicating many hedge fund managers took advantage of increased market volatility. “Of course, given the environments, short traders did extremely well,” he said.

    Mr. Farkas noted the continued outperformance of emerging market specialist funds, pumped as they were by hot returns from India, China and Russia in particular. By way of evidence, Mr. Farkas pointed to the two best performing hedge funds for the quarter across all categories with more than $100 million in assets: the Monsoon India Inflection Fund LP, which returned 47.38%, and the Monsoon India Inflection Fund 2 LP, with a 45.11%. Monsoon Capital LLC, Bethesda, Md., manages both funds.

    “Being in the right place really helped, and funds that had short positions in subprime mortgages, for example, did quite well,” Mr. Farkas added. One manager in the right place shorting subprime assets was Balestra Capital Partners LP, which had the third-best performing fund with a 40.42% return for the period. The manager is Balestra Capital Ltd., New York

    Mr. Farkas said hedge funds in the Global Trend category — which tend to manage a lot of managed futures, commodities and currencies — also had a good quarter because no sharp changes happened in global trends. For example, the U.S. dollar remained weak throughout the quarter, and many hedge fund managers benefited from their short bets on the American currency.

    Still, the fourth and fifth best-performing hedge funds were macro funds from Mormingstar’s Global Non-Trend category. Clarium LP, managed by Clarium Capital Management LLC, New York, returned 30.89%, while Quantitative Global Fund (3X), managed by Quantitative Investment Management LLC, Charlottesville, Va., returned 28.73%.

    Weak performance in the Corporate Actions strategy also resulted from the credit crunch that plagued the quarter as available capital for mergers and acquisition activity dried up, making it hard for event-driven and merger arbitrage managers to find alpha. Mr. Farkas said many hedge funds with a value bias, such as activist hedge funds, found it hard to make money in the fourth quarter for the same reasons.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing