Hedge funds lose $156 billion in October

By Christine Williamson

Total hedge fund industry assets dropped by a net $156 billion in October — $115 billion from performance-related losses and $41 billion from net redemptions, according to data from Hedge Fund Research.

Assets under management in hedge funds dropped to $1.6 trillion as of Oct. 31, a decline of 9% for the month, and 16% less than year-end 2007. HFR analysts noted in a report that the Oct. 31 asset figure is the lowest since Dec. 31, 2006.

The HFRI Fund Weighted Composite index returned -6% in October, -12% since Sept. 1 and -16% year-to-date Oct. 31, according to HFR data.

Hedge funds of funds were hit hardest by redemptions in October, with investors withdrawing a net $22 billion. HFR analysts attributed the outflows to investor dissatisfaction with underperformance: The HFRI Fund of Funds index year-to-date Oct. 31 returned -18.5%, 250 basis points lower than HFR’s hedge fund index for the same period