Hedgies Struggle Through Tough First Half

A fair number of hedge fund luminaries, David Einhorn and John Paulson among them, are probably glad the first half of 2011 has drawn to a close. Some of the industry’s biggest names struggled to generate alpha (or return in excess of a benchmark) in the first six months of this year. Einhorn’s Greenlight Capital and Paulson’s Paulson & Co. aren’t alone in their struggles. Citing data from Hedge Fund Research, Reuters reports the average hedge fund was down 2.12% through the end of June, compared to a 6% increase for the S&P 500.

The losses were worse for some of the industry’s biggest names. Punished by sour bets on financial services stocks and the Sino-Forest (SNOFF) debacle, Paulson’s $18 billion flagship Advantage Fund was down 15% through end of last month, according to FINAlternatives. Einhorn’s Greenlight Capital and Louis Bacon’s flagship Moore Capital Management’s Global Fund were both off about 5% as of mid-June, FINAlternatives also reported. By comparison, the 2.27% drop for William Ackman’s Pershing Square Capital through mid-June looks pretty good.

BP (BP), Europe’s second-largest oil company, Ensco (ESV) and the Market Vector’s Gold Miners ETF (GDX) were among Einhorn’s losing first-quarter bets, according data from tickerspy.com.

Yet even with the struggles of some of the industry’s biggest names, hedge funds are raising capital at a brisk pace; Reuters also noted $32 billion in new investments sent to hedge funds by pensions and other institutional money managers in the first quarter alone, more than half the total raised all of last year.

On the bright side, at least for Paulson’s clients, is the fact that the fund manager was down late into 2010 before ultimately finishing the year well in the green. Clients can only hope for a sequel this year.

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