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Administration August 14, 2007
Another Hedge Fund Reports Trouble
August 14, 2007 (PLANSPONSOR.com) - Clifford Asness,
founder and managing principal of AQR Capital Management, has
told investors one of AQR's Global Stock Selection funds has
"come under severe pressure" from recent financial market
volatility, resulting in "shockingly bad" returns for it and
others with similar strategies, the Stamford Advocate
reports.
Reported by Rebecca Moore
Asness disclosed that the fund, which uses borrowed money, has lost 21% year to date, the news report said. Asness blamed the losses on the “strategy getting too crowded,” rather than the models not working.
A report published by Lehman Brothers Holdings Inc. analyst Matthew Rothman said hedge fund firms were forced to sell more liquid stock investments to raise cash and reduce debt which caused the models used by quantitative funds to short-circuit, according to the Stamford Advocate. Stock positions the models predicted would fall in price rose and shares they predicted would rise, fell.
However, funds using other strategies have weathered the wild market in much better shape, the news report said. AQR’s larger asset-allocation fund was up about 3.5% in August and the firm has received commitments for at least $700 million in new capital.
Due to declines in the subprime mortgage market, some large hedge funds have closed or blocked investors from pulling out money since the beginning of July (See Two Hedge Funds Fall Victim to Subprime Mortgage Woes and MA Pension, Harvard Feel Loss from Hedge Fund Collapse ). With only three of the six strategies posting net-of-fees gains, July was the weakest month in 2007 for the performance of hedge fund strategies, Dow Jones Hedge Fund Indexes reported (See July a Rough Month for Hedge Funds: Dow Jones Indexes ).
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