Bloody August for Hedge Funds

By Todd Shriber

Barring a last-minute, epic bull move, the eighth month of 2011 is going down as one of the worst months for hedge funds in any year.

The average hedge fund is down 4.1% this month, FINAlternatives reports, citing Hedge Fund Research. That anecdote is bad enough on its own, but wait, there’s more.

FINAlternatives notes this month will be the worst for hedge funds since the fall of Lehman Brothers and one of the five worst months since 1990.

Not surprisingly, the bigger they are, the harder they fall. That’s very much the case when it comes to John Paulson’s Paulson & Co. As of last Friday, Paulson’s flagship Advantage Plus Fund was down nearly 39% for the year and was averaging a loss of more than 1% through the first 19 trading days of the month, according to the Financial Times.

Paulson continues to be undone by stakes in Bank of America (BAC), Citigroup (C) and Hewlett-Packard (HPQ), just to name a few. Viking Global Investors has also been bit by financials, namely JPMorgan Chase (JPM) and Invesco (IVZ). In other words, hedge funds with long equities exposure are getting crushed.

Hedgies may be struggling with stocks, but they’re not shy about being bullish on agriculture commodities. Hedge funds and other speculators raised their net-long positions across 11 agricultural futures and options by 15% to 776,774 contracts in the week through Aug. 23, Bloomberg reported.

Hey, who needs to deal in bank stocks when there are corn and soybean profits to be had?

Disclosure: Writer is long Citigroup.

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