Hedge Funds Lost 1.9% in October as Global Stocks Dropped

Hedge funds lost 1.9 percent in October as global stocks slumped after companies reported earnings that sparked concern the economy was slowing. “There were plenty of headwinds out there -- the S&P was down, that weighed on equities in total and most of the long- short equity players,” said Charles Mires, director of fixed income and alternative strategies at Franklin Street Partners Inc., the $2 billion Chapel Hill, North Carolina-based wealth manager and fund of funds.
The October results reduced hedge funds’ gains this year to 1.1 percent, compared with an advance of 13 percent for equities worldwide, including dividends. The index tracking performance in the $2.19 trillion industry is down 11 percent from its July 2007 peak. Paulson’s Advantage Plus fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, lost 3 percent in October and is down 17 percent this year, according to a person briefed on the results, who asked not to be identified because the information isn’t public. Paulson’s Advantage Fund, which employs a similar strategy, dropped 2.3 percent last month and 13 percent year-to- date, the person said.

Macro Funds

Macro funds, which bet on economic trends, fell 0.6 percent in October and 1.3 percent this year. Brevan Howard Management LLP posted a 0.2 percent decline last month through Oct. 19 in its flagship fund, bringing year-to-date gains to 1.5 percent, said a person briefed on the performance, who asked not to be identified because the fund isn’t public. Alan Howard founded $39 billion London-based Brevan Howard in 2002.
Multistrategy funds slumped 2.5 percent last month and 7.1 percent in 2012, according to data compiled by Bloomberg. Long- short equity funds, whose managers can bet on rising and falling stocks, fell 1.2 percent in October, paring gains this year to 1.5 percent. Hedge funds that beat benchmarks last month included Citadel LLC, the $13 billion Chicago-based firm founded by Ken Griffin; SAC Capital Advisors LP, the $14 billion Stamford, Connecticut-based firm run by Steven A. Cohen; and Daniel Loeb’s $9.6 billion Third Point LLC, based in New York.

Paulson’s Gains

The manager posted gains last month in several other funds, according to the person. Paulson Enhanced advanced 1.5 percent in October and 9.1 percent in 2012. Paulson Credit Opportunities rose 3.8 percent last month and 6 percent this year. Paulson Recovery gained 2.2 percent during the month and 2.6 percent year-to-date. Paulson’s Gold Fund declined 6.9 percent during the month as bullion fell. The hedge fund is down 11 percent in 2012.

Citadel, SAC

Citadel posted a 3.2 percent return in its main Kensington and Wellington funds, bringing year-to-date gains to 19 percent, according to a person familiar with the matter, who asked not to be identified because the information isn’t public. Katie Spring, a spokeswoman for Citadel, declined to comment on the returns.
SAC rose 1.1 percent in October and 10 percent this year, said a person briefed on the returns. Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., declined to comment.
Hedge fund assets grew 3.6 percent to a record $2.19 trillion in the third quarter, according to Chicago-based Hedge Fund Research Inc. Investors deposited $10.6 billion during the period, the firm said last month