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More Than 80 Percent of Hedge Funds Underwater

I find this somewhat fascinating since the popular image if hedge funds is one of remorseless money making machines when in fact most are run by complete dickheads with very little ability.

The selloff in most of the global markets in the third quarter heavily impacted a large number of hedge funds.

In fact, not only did it put many funds into the red for the year, it pushed a huge number of hedge funds below their high water mark.
According to HFR, at the end of the third quarter just 19.3 percent of all hedge funds were above that critical level that determines whether their investors’ accounts are in the black. This is way down from 44.2 percent at the end of the second quarter and less than half the level of each of the three prior quarters.

In fact, the 19.3 percent is the lowest level since the end of the first quarter of 2009, when it bottomed at 18.7 percent, by far the all-time low since HFR began keeping score in 2003.

But even the 19.3 percent figure could be overstating how the average investor in those funds is faring in general. While those invested in these underwater funds for many years before the current slide could still be in the black, many hedge funds with good long-term records traditionally gather the biggest chunk of their assets after their big run-up.

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