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Hedge funds see worst year since financial crisis

Hedge fund performance over the past three months hearkened back to the bad old days of the financial crisis.

Poor performance weighed heavily on the industry, causing the biggest net loss in capital since the fourth quarter of 2008, according to data released Tuesday by HFR. The $95 billion decline pushed total industry assets further from the vaunted $3 trillion mark.

As measured by the HFRI Fund Weighted Composite Index, the industry saw a 3.9 percent performance drop in the third quarter, taking the barometer into negative territory for the year at minus 1.5 percent. At this pace, hedge funds will turn in their worst performance year since 2011.

The bright side is that the industry actually outperformed the equity market through the end of the quarter, as the S&P 500 (INDEX: .SPX) fell more than 6 percent through the first nine months. The S&P has since rebounded, jumping 5.6 percent in October to pull within 1.5 percent of breakeven for the year.

Kenneth J. Heinz, HFR’s president, said funds have followed suit and should be able to reverse the earlier money drain.

“Recent market turmoil has resulted in increased risk aversion by investors but has also created opportunities for innovative approaches in key tactical and strategic areas,” Heinz said in a statement. “Funds of all sizes have already experienced a powerful performance recovery through mid-October, which is likely to drive industry capital gains into year end.”

Investors actually have been putting money to work in hedge funds this year.

Total inflows came to $47.9 billion in the third quarter, offsetting $42.3 billion in redemptions for $5.6 billion in net flows, according to HFR. Event-driven strategies have performed poorly, losing 5.1 percent in the quarter and 2.85 percent for the year, yet saw inflows of $5.4 billion.

Equity strategies have received the most cash, pulling in $23.8 billion for the year and $2.4 billion for the quarter despite losing 2.3 percent through the first nine months.

The best performing industry strategy has been volatility, which was up 5.5 percent, while Latin America (down 20.2 percent) and energy (off 12.4 percent) represented the biggest losses.



TradeHacking Market Recap for 9/29/15

TradeHacking Market Recap for 9/29/15.

Market recap for 9-29-2015. Markets ended mixed for today with the large caps fairing better than the growth stocks. DJIA and S&P 500 ended up while the Nasdaq Composite and Nasdaq 100 were down.

Investors eye China’s economic slowdown as a possible precursor of what the Fed will do next.

US stocks fall sharply on China growth worries

US stocks plunge amid ongoing worries about the outlook for growth in China; Drugmakers slide

NEW YORK (AP) — Ongoing worries about the health of the Chinese economy and another big sell-off in drugmakers pushed the stock market back toward its lowest level of the year.

Energy and raw material companies dropped on reports that industrial profits at Chinese companies fell sharply in August, heightening worries about a slowdown in the world’s second-biggest economy. Health care stocks fell sharply as drugmakers extended a decline that began last week.

china-stock-marketStocks have fallen sharply in August and September on concern that a slowdown in China is worse than previously thought and is spreading to other emerging market economies. The slowdown could start hurting U.S. companies that rely on overseas demand for a large portion of their profits.

“Whenever the market is down, the first place to look these days is China,” said John Manley, chief equity strategist at Wells Fargo Fund Management. “Right now, we need evidence that China is not slowing that much and that profits are still going to be OK.”

The Standard & Poor’s 500 index slipped 49.57 points, or 2.6 percent, to 1,881.77. The index is now 14 points above its lowest level of the year, set Aug. 25.

The Dow Jones industrial average lost 312.78 points, or 1.9 percent, to 16,001.89. The Nasdaq composite slumped 142.53 points, or 3 percent, to 4,543.97.

Monday’s slump put the S&P 500 index back in a “correction,” a Wall Street term meaning a drop of 10 percent or more from a recent peak. The index is down 11.7 percent from its record close of 2,130.82, set in May of this year.

Some analysts expressed surprise at the ferocity of Monday’s sell-off, given the relative strength of the U.S. economy. Hiring is coming back and the housing the market is recovering.

“The economy here is still improving. There’s no reason that this selling pressure should be as severe as it has been,” said Robert Pavlik chief market strategist at Boston Private Wealth.

Health care stocks are another weak link in the market.

traderA sell-off in drugmakers extended into a second week. The Nasdaq Biotechnology index dropped 6 percent, its worst day in more than four years. The sector — a recent favorite of investors — slumped last week after Democratic presidential candidate Hillary Rodman Clinton announced a plan to tackle rising drug costs. The sector has plunged 27 percent since reaching a peak in July.

Congressional Democrats are also pressing a Republican committee chairman to force Valeant Pharmaceuticals, a Canadian drugmaker, to turn over documents tied to price hikes imposed earlier this year. The company’s U.S.-listed stock plunged $32.97, or 17 percent, to $166.50.

Alcoa was among the stocks that bucked the trend on Monday and closed higher.

The metals maker gained after announcing that it will split into two independent companies. Its bauxite, aluminum and casting operations will be in one company and its engineering and transportation businesses will be in another. The company’s stock rose 52 cents, or 6 percent, to $9.59.

In addition to concerns about the outlook for growth in China, investors have also been worried about U.S. interest rates. Federal Reserve Bank of New York President William Dudley said in an interview with The Wall Street Journal on Monday that he expects policymakers will raise rates this year. The Fed has kept short-term rates close to zero for almost seven years to help the economy recover from the financial crisis.

vw_emissionsIn Europe, Volkswagen resumed its slide.

The carmaker’s stock fell 7 percent as German prosecutors opened an investigation against the company’s former CEO, Martin Winterkorn. The probe aims to determine who was responsible for selling vehicles with manipulated emissions data, prosecutors in Germany said in a statement.

The stocks of other European automakers, including BMW, Daimler and Fiat Chrysler also fell sharply.

U.S. government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.10 percent from 2.16 percent on Friday. The euro was little changed from Friday at $1.1201 and the dollar fell 0.7 percent to 119.9 yen.

The price of oil fell sharply on concerns that weak global economic conditions would reduce demand for energy. U.S. crude fell $1.27 to close at $44.43 a barrel in New York. Brent Crude, a benchmark for international oils used by many U.S. refineries, fell $1.26 to close at $47.34 in London.

In other futures trading on the NYMEX:

— Wholesale gasoline fell 4.7 cents to close at $1.349 a gallon.

— Heating oil fell 4.5 cents to close at $1.477 a gallon.

— Natural gas fell 0.1 cent to close at $2.563 per 1,000 cubic feet.

Gold fell $13.90 to $1,131.70 an ounce. Silver dropped 57 cents to $14.54 an ounce and copper fell 3.2 cents or $2.25 a pound.

Source: (Associated Press)

Stay put while volatile stocks flounder: Experts

Stock market pain could persist well into next month, and investors may want to stay put until they see signs that equities have settled, experts said Monday.

Major U.S. averages all closed about 2 percent or more lower, as the Dow Jones industrial average(Dow Jones Global Indexes: .DJI) fell below 16,000 during the session for the first time since Sept. 1. Biotechnology stocks suffered another rough day, leading a 3 percent loss in the Nasdaq(NASDAQ: .IXIC).

markets-downBut with potentially lackluster quarterly earnings looming and global growth concerns lingering, stocks may take another leg down before reaching appealing prices, said John Manley, chief equity strategist at Wells Fargo Funds Management.

“I think you have to watch the earnings. They’re not acting well here,” he said on CNBC’s “Closing Bell.”  “I’m not in a rush. Let it settle.”

The S&P 500 (INDEX: .SPX) ended Monday at 1,181.77, its lowest close since Aug. 25. While the index could slip through 1,850, it will likely reach a floor near there and offer buying opportunities, said Peter Costa, president of Empire executions and a New York Stock Exchange governor.

“I think that’s going to be the bottom for this phase,” Costa said on “Closing Bell.”

While agreeing that the S&P may break through 1,850, Virtu Financial trader Matt Cheslock added that it could mount a stark reversal after that.

Though sustained low prices could lead to brutal energy earnings, most sectors will not suffer as much, added Sam Stovall, chief equity strategist at S&P Capital IQ.

“Things actually look pretty healthy under the surface,” he said on “Closing Bell.”


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