Hedge funds had their best month since February when they reported a 1.56 percent rise in August, according to data released on Monday, on a mix of corporate deals and strong company earnings that helped push the stock market higher.
But these loosely regulated portfolios are still lagging the broader market, posting a 4.10 percent year-to-date return of through August, according to Hedge Fund Research, compared with the Standard & Poor's 500 9.87 percent gain for the year. In August, the S&P gained 3.8 percent.
Even though hedge funds have become a mainstay in pension fund portfolios over the last years, their recent lackluster returns have prompted questions about their use, especially since they charge far higher fees than mutual funds.
The California Public Employee Retirement System, with $290 billion in assets, for example, is mulling cutting back its investments in hedge funds as part of a plan to cut exposure to riskier assets.
Last month, fund managers who pursue a so-called global macro strategy where they make big bets on interest rates and currencies gained 2.1 percent as they expected fresh central bank stimulus measures would hurt the Euro. They ranked among the industry's best performers in August, the data show.
"August was an exciting month for hedge fund performance with gains across all strategies, quickly recovering as equity markets rebounded from the late July sell off," said Kenneth Heinz, HFR's president. "Gains were both strong and balanced across strategies as well as fund sizes, ranging from the largest to smallest funds in the industry."
Hedge funds try to keep their performance numbers secret which makes any inkling of how some of the world's largest funds fared big news.
In August Daniel Loeb's Third Point Offshore Fund gained 1.7 percent, leaving it up 6.4 percent for the year. David Einhorn's Greenlight Capital gained 0.4 percent in August and is up 4 percent for the year while John Paulson's Advantage fund, dropped 1.5 percent in August, leaving it down about 5 percent for the year, people familiar with their numbers but not authorized to discuss them publicly said. Daniel Och's flagship OZ Master Fund inched up 0.49 percent and is up 2.57 percent.
Only William Ackman has double digit returns, having told investors that his Pershing Square Holdings portfolio climbed 31 percent this year.
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