Hedge funds have suffered their biggest monthly monetary loss since the 2008 financial crisis in the wake of market turbulence that battered the portfolios of some of the industry's best known investors.
The sector as a whole lost $78 billion due to its performance in August, the worst monthly absolute fall in assets since October 2008 — the month following the collapse of Lehman Brothers — according to research by Citi.
"The only thing that seemed to work was cash. Of course that's the one thing they [the hedge funds] don't have," said Paul Brain, head of fixed income for Newton Investment Management and a former credit hedge fund manager.
Some of the worst hit were funds that specialised in stock picking, with David Einhorn's $11 billion Greenlight Capital having lost 17 per cent up to the end of September, Daniel Loeb's $17 bilion Third Point down about 4 per cent and Bill Ackman's Pershing Square vehicle down double digits over the summer.
Total hedge fund industry assets at the end of August stood at $3.05 trillion, according to Citi, down 0.2 per cent year on year. Total hedge fund assets have doubled since 2008, according to HFR.