The FT reports that August will be the industryâ??s worst month since October 2008, when the collapse of Lehman Brothers triggered a worldwide sell-off.It will almost certainly also be one of the top five worst months for the industry since performance data started to be aggregated in 1990.
According to the FT, the average hedge fund manager has lost 4.1 per cent in the past four weeks.
Equity-focused managers have fared even worse, losing an estimated 6.9 per cent â?? a staggering drop for an industry that prides itself on risk management, and charges accordingly.
The numbers are the worst for strategies based on detailed analysis of companiesâ?? prospects, but even macro-oriented managers and specialists have fallen foul of the market convulsions.
Many of the industryâ??s biggest names have been badly burnt and it now remains to be seen whether a wave of investor redemptions will follow.
Paulson & Co, the $36bn hedge fund run by John Paulson that shot to fame in 2007 thanks to its spectacular short positions against the US subprime housing market, has been among the most prominent casualties.
But the fund is not alone. Fellow so-called event-driven fund managers York Capital Management, Perry Capital and Owl Creek â?? among the biggest names following that strategy â?? have all suffered.
Indeed, event-driven funds, which aim to make money by taking positions in equities and credit linked to corporate events such as restructurings, IPOs or bankruptcies, have been among the hardest hit in the industry.
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