Because of fears of a slowing global economy, stock market volatility and a decision concerning Fannie Mae and Freddie Mac that took a heavy toll on many fund managers, hedge funds had a sluggish autumn. Among the hardest hit was John Paulson’s firm, with one of its funds losing 11%, according to Businessweek.
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Hedge funds as a group returned 2.3% and were down in September 0.2% compared to a 6.7% upside for the S&P 500 so far this year. Hedge funds even fell behind U.S. treasurys up 3.7% so far in 2014. After the September 18th peak, stocks have slid 4.1% and volatility has grown by 56%.
Paulson’s funds were performing well until July, but were hit particularly hard in September. His Advantage fund, which invests in companies going through corporate transition, dropped 13%. The Advantage Plus fund fell 11%, according to sources close to the matter. However, the unrestricted share class of Advantage was up in September, mainly because of its investment in Alibaba, which had a successful IPO last month.
Not all hedge funds have been losing bets. Ken Griffin’s Citadel rose 4.4% in September, with its main Kensington and Wellington funds returning 15% so far in 2014.