Hedge funds at a loss to cope with mood swing

Times of London ^ | 08/20/08 | Patrick Hosking and Clare Harrison

[TigerLikesRooster]

Hedge funds at a loss to cope with mood swing

Patrick Hosking and Clare Harrison

The hedge fund group that took a huge bet on Northern Rock as it was imploding last autumn has reportedly lost 85 per cent of its investors' money, amid evidence of a terrible spell this summer for many hedge funds.

SRM, the Monaco-based group that raised $3 billion from investors in September 2006, is down by 85 per cent, according to The Wall Street Journal, including a minus 77 per cent performance in the past year. Tight lock-up terms prevent investors from withdrawing their money.

SRM, which was founded by Jon Wood, the former UBS investment star, is also thought to have been burnt by disappointing investments in Countrywide Financial, the American mortgage group; Bear Stearns, the investment bank rescued by JP Morgan; and Cheniere Energy, a struggling Houston-based energy company.

The news from SRM, which bought more than 10 per cent of Northern Rock only to see it nationalised, comes as many rival hedge funds post losses after being wrongfooted by the sudden change in sentiment over energy prices, financial stocks and the dollar.

Many alternative asset managers, who pride themselves on their ability to make money regardless of market conditions, posted their worst figures for years in July and most are nursing losses for the year to date.

[TigerLikesRooster]

Ping!

[kms61]

Hedge fund implies some kind of hedging strategy. Many of these so called hedge funds are simply unregistered mutual funds.

[TigerLikesRooster]

It seems many amplifies risk in a quest for high return.

[raybbr]

Hedge funds remind me of the Enron scam. People expecting huge returns with no real basis for investment. Just a quick buck.

[GOPJ]

Thanks for the ping.

[pointsal]

Bingo....one of the hedge funds has purchased raw land and planted a vineyard... Hmmmm