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Hedge Fund Wreckage

From Bloomberg

Of course, the most visible big loser this year is John Paulson. For example, through September 27, Paulson Advantage Fund was down 6 percent for the month and more than 28 percent for the year, while Paulson Advantage Plus, which takes on additional leverage, is presumably down even more.

Paulson International Fund was down 5.38 percent for the month, although it was “only” off 9.47 percent for the year.

This is interesting because Paulson was one of the big winners during the GFC when he positioned himself well for the collapse that followed. It is looking at present that this might just have been a fluke and that his one good trade is behind him.

Through September 28, Templeton Emerging Market Fund, headed by legendary emerging markets manager Mark Mobius lost about 20 percent for the month, and after just three trading days in October was down 22.70 percent for the full year.

WTF….how can a fund be down 22.70% after only three trading days. When I read stats like this I often wonder whether some hedge funds have simple succeeded because of luck and size. It is intriguing that these funds which supposedly hire the best and the brightest lack a basic understanding of risk management.

And it gets worse….

Meanwhile, Bloomberg reported that currency specialist Covepoint Capital Advisors, headed by Melissa Ko, lost an astounding 38 percent in September in its Covepoint Emerging Markets Macro fund, pushing it down roughly 25 percent for the year. The fund reportedly bet 84 percent of its assets in currencies, one-fifth of which was invested in Mexico.

The complete article can be found here



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