RPT-U.S. hedge funds brace for worst year since financial crisis

Sun Oct 4, 2015 7:00pm EDT
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(Repeats story sent Friday evening with no changes to text)

By Svea Herbst-Bayliss

BOSTON Oct 4 (Reuters) - U.S. hedge funds are bracing for their worst year since the 2008 financial crisis after a dramatic sell-off in healthcare and biotechnology stocks triggered double-digit losses for some prominent players last month.

September's sucker punch in the biotech sector, on top of a grim August when global markets tumbled due to fears about slowing growth in China, have pushed many hedge fund managers deep into the red.

"These are some of the worst numbers we have seen since the crisis," said Sam Abbas, whose Symmetric IO tracks hedge fund managers' returns.

The average hedge fund lost 19 percent in 2008 when the credit crunch hit. Since then, hedge funds have had only one down year, when they lost 5.25 percent in 2011, data from Hedge Fund Research show.

While the biotech sector held up relatively well during the initial market sell-off in August, it cratered in September.

"It was the last remaining bastion of alpha and a sector where many hedge funds were hiding. Now it has succumbed," said Peter Rup, chief executive and chief investment officer at Artemis Wealth Advisors Llc, which invests in hedge funds.

Rup said he was expecting some big negative surprises as more hedge funds send September returns to clients.   Continued...