Hedge funds are hurting

The data is from CS/Tremont index. It shows that September was a difficult month for hedge funds across strategies. Convertible Arbitrage was the worst performing sector, finishing down 12.26%.

Also according to the data released the other day by Hedge Fund Research, steep performance losses and record investor capital redemptions reduced the size of the hedge fund industry by $210 billion in the third quarter of 2008. Investors withdrew over $31 billion. Total industry capital industry stood at $1.72 trillion, down from $1.93 trillion at the end of second quarter.

The third quarter withdrawls entirely offset the capital inflows into hedge fund during the first half of the year, bringing YTD net capital flows to a negative $2.5 billion. The decline in industry assets also exceeds the entire amount of investor capital inflow from 2007, which was a record $194 billion.

Funds of Hedge Funds also experienced performance losses and investor capital outflows in the third quarter, with these declining by 9.68 percent for the period and 11.82 percent for the year. Total capital invested in Funds of Funds fell by approximately $78 billion as investors withdrew $13.3 billion from Funds of Funds during the quarter.

The third quarter outflow from Funds of Funds partially offsets the capital inflow experienced in the first half of the year, and year-to-date inflows for Funds of Funds now total just under $10 billion, while total capital invested in Fund of Funds stands at $747 billion.

What a bloodbath to hedge funds!