For hedge funds, September was even worse than August.
The average fund lost 3.7 percent last month after dropping 3.4 percent in August, according to data released on Friday by industry consultant Hennessee Group.
The third quarter is being called the worst in three years, and the average hedge fund is now down 5.2 percent this year.
For many of the industry's most established stars, the news is even worse. Pershing Square Capital Management's William Ackman lost 5.70 percent in September and is now off nearly 16 percent for the year; Lee Ainslie's Maverick Capital sank 8 percent for a year-to-date loss of nearly 17 percent; and Leon Cooperman lost 7.6 percent, leaving his Omega Oversees Partners Fund down 12.3 percent, people familiar with the numbers said.
Even John Thaler, one of the year's very top performers with steady double-digit gains, lost 3.2 percent last month. His year-to-date returns remains at 31 percent.
Hedge fund returns are often closely guarded secrets, so any information on how some of the top names are performing is closely monitored. Other performance trackers like Hedge Fund Research are expected to release their numbers soon.
"August largely repeated itself in September for us," hedge fund manager Whitney Tilson told investors in his T2 Partners LLC, which tumbled 9.5 percent last month.
Managers again faced erratic markets beset by fears about Europe's debt crisis and sluggish growth plus stubbornly high unemployment in the United States. In conversations with clients, some managers complained that a new mood of fear, with investors simply dumping stocks, hurt their performance during the month.
The Standard & Poor's 500 index, a broad stock market index, fell 7 percent in September.
Even though initial hedge fund industry data suggest these loosely regulated funds, on average, preserved capital better than others, some sense of discontent is spreading among investors.
Grumbling that the $2 trillion industry's super heroes are looking rather human is picking up.
John Paulson, who is expected to report his September numbers to investors very soon, is among the most closely watched and widely scorned for overly aggressive bets on big banks. In the first eight months of the year, Paulson's Advantage Plus fund lost 35 percent, and talk is reverberating through the industry that the number will be even higher now, possibly topping 40 percent, several investors in his fund said.
Several hedge fund investors said many funds are performing worse on a relative basis than they did during the financial crisis and that investors' patience is being tested.
Industry analysts say redemption requests could tick up this month and that more than the usual handful of managers will be forced out of business this year.
"I'm astonished at just how breathtakingly bad some of the performance numbers are," said one investor who is not authorized to speak publicly to the media. "Some of these guys who took in lots and lots of money on the back of one or two bets that paid off are in trouble. As an investor, I need to see you have hits over and over and over again for me to believe that you really are a star."
Among the standouts, SAC's Steven Cohen is still up 6.5 percent for the year despite a 1.5 percent drop in September, a person familiar with his numbers said. Also, Paul Tudor Jones's Tudor BVI Global fund rose 4.9 percent last month and is up 5.45 percent for the year to date, and Louis Bacon's Moore Global Investments gained 2.6 percent in September even though it remains down 1.64 percent for the year.
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