Asian hedge funds were down 5.3% for October, during a turbulent month in which the MSCI World index was down 19.1%. Hedge funds have been slashing gross and net exposures, which helps to account for their lower losses. The Eurekahedge fund index was down 3.9% in October, and following on the heels of a September decline of 5%, it represents the worst month-on-month hedge fund performance in a decade. In October, CTA/managed futures were up 6% according to Eurekahedge, bringing them up 16% for 2008 so far. While macro stayed flat, every other strategy slumped, with long/short, event driven and relative value all flirting with 5% declines. Arbitrage and multi-strategy were down 3.5%. At the rear were fixed income and distressed debt with 10% falls.   more »

There are two sets of impacts of the US financial crisis. Internally, though the threat of a total financial collapse has receded, the real economy is starting to show the impacts of the rapid financial deleveraging now taking place: A sharp, and possibly prolonged, recession is going to happen. Globally, other economies are starting to see the same processes at work in their financial sectors and in real economic activity. Providing ample liquidity avoids creating artificial insolvencies, but some institutions may genuinely have to go to the wall if their assets, properly valued, do not cover liabilities. One area of vulnerability is the real estate sector. Other sectors where investment has been aggressive may also see weaker firms face problems. India has no proper bankruptcy laws. A potential crisis may be an opportunity to create some streamlined procedures for restructuring. There will be secondary effects on the banking sector if real estate and other loans start going bad, and loosening monetary policy may provide a cushion   more »

Often-touted as manipulative, hedge funds have been time and again blamed for indiscriminate selling and thereby pulling down the domestic stock prices even in India. But India-focused hedge funds have also been affected by the meltdown. The big and secretive India-focused funds have booked losses to the tune of 46% in 2008 — in the process effectively wiping out the 50% returns clocked by the posted by them in 2007. Hedge funds have an aggressively managed portfolio of investments which use advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns.   more »