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Wall Street Roundup

Hedge funds lose 1.3% in August

September 11, 2007|From Times Wire Services

The average U.S. hedge fund lost money in August, the first time this year that the loosely regulated portfolios were in the red, according to data released Monday.

Hedge funds lost 1.3% on average in August, their worst monthly performance since May 2006, after inching up 0.5% in July, according to fund tracker Hedge Fund Research.

Hennessee Group, which also monitors hedge fund performance, said the average fund slipped 0.7% in August after returning 0.3% in July.

But the losses for the industry as a whole were not as steep as many investors had feared late last month after some prominent funds reported double-digit declines.

However, only 40% of hedge funds have reported their numbers for August. Because funds with poor returns traditionally take longer to report, the monthly average could be pulled lower as more funds post their returns.

After Goldman Sachs' Global Equity Opportunities Fund lost 30% in a few days and other funds also suffered, Hedge Fund Research said the average fund had lost 3.7% during the first 22 days of the month. But many funds were able to pare losses in the last days of August.

August's losses as reported barely affected the average performance for the first eight months of 2007. For the year through August, the average fund was up 8.3%, compared with an 8.9% gain through July, Hennessee said.

Hedge funds, many of which say they can make money in any kind of market, underperformed the Standard & Poor's 500 index and the Dow Jones industrial average, which gained 1.3% and 1.1%, respectively, in August.

The hedge-fund categories with the biggest losses were emerging-market funds, which lost 2.5%; high-yield bond funds, which lost 2%; and "macro" funds, which lost 2%, Hedge Fund Research reported. Macro funds make big bets on currencies, interest rates and commodities.

Emerging-market funds that focus on Latin America lost 2.9%. Those that focus on Russia and Eastern Europe lost 3.9%.

In July, emerging-market hedge funds returned on average 3.8%, and high-yield funds gained 1.3%.

So-called short sellers, the handful of funds that do nothing but bet that prices will fall and make money by borrowing securities in the hopes of repaying the loan for less later, fared well. The category notched its third monthly gain in a row, returning 1.3% in August. That puts it up 11% for the first eight months of 2007.

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