According to the Lipper Hedge Fund Composite Index, hedge fund returns were down 0.2% over August. Although in negative territory, returns year-to-date hit -1.04%, so August was a good month.
Many managers were also on holiday. The CBOE reported that daily volumes in August averaged 3.5 million contracts, a 9% decline from July 2010. NYSE average daily volume for U.S. equity options fell 2.9% month-on-month, perhaps suggesting that hedge funds (along with much of the asset management world) were relaxing by the blue pool, rather than fretting by the dark one.
Looking at historical data from Lipper, a Thomson Reuters company, August returns for hedge funds have remained relatively stable over the past decade, at least compared to the rollercoaster of the S&P 500,
Given the tough time hedge fund managers have had in 2010, perhaps they should take longer holidays, as they seem to have lost their investors less money than usual (average return in over the past decade of Augusts is 0.6%). Or perhaps they leave very organised trading strategies behind during August. Or they have extremely talented junior analysts left in the office, improving the bosss trading strategy and making sure the air con is switched off each day.
Obviously, the top brass of the S&P 500 also take much of August off. Unfortunately there is no pattern for what happens to S&P 500 firms when the boardroom goes on holiday, although interestingly, only 2004 saw an overwhelmingly positive holiday season. Perhaps the top management in the S&P 500 do know what they are doing, and are hard done by in the media?
In that case, given the average of -1.5% returns of the S&P 500 during the past decade of Augusts, they should not be allowed on holiday at all, in the interest of the shareholders.