The average hedge fund sank 4.8 percent in 2011, data compiled by Hedge Fund Research showed. The Standard and Poor’s 500 stock index, by comparison, ended the year roughly flat. In 2010, the average hedge fund rose by more than 10 percent.
2011 marks only the third calendar year since HFR began measuring industry-wide performance in 1990 that hedge funds have finished in the red.
It is also the industry’s second decline in four years.
Even though the fourth quarter of 2011 saw hedge funds gain 1.3 percent, that small boost barely helped firms whipsawed by record volatility in the third quarter as the European sovereign debt crisis sent markets into freefall, and the U.S. economy stagnated. Hedge funds lost almost 7 percent from the beginning of July through September 30.
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