Throughout Market Turmoil, Some Hedge Funds Win

Aug. 16, 2007 — -- Fear on Wall Street these days is being driven in part by news that several well-known hedge funds are in trouble because of investments in subprime mortgages.

But don't blame all hedge funds.

Information about hedge funds is murky at best. But the limited data available indicates that while some funds are plunging, others are skyrocketing. And as a whole, hedge funds in general seem to be doing OK.

The troubled funds that made poor investments in the subprime market are a "smaller percentage of the hedge fund industry than many people might realize," said Corey Goldman, North America editor of Hedge Fund Manager, a weekly newsletter.

Goldman says that some healthy funds are taking advantage of the market downturn, buying up stocks they want at a cheaper price.

Then there are those profiting off the mortgage woes.

"There are certainly some funds out there that are probably looking [at] — if not already taking advantage of — some of the fallout of the subprime area," Goldman added.

It is very hard to get a clear picture of the hedge fund industry. The vast majority of funds don't release information about their performance to the public, which is allowed under Securities Exchange Commission rules.

Several research firms and trade publications track returns, but their data is often weeks — if not months — delayed.

Hedge Fund Research Inc. keeps a database of more than 6,800 hedge funds and maintains indices tracking the various hedge fund sectors from arbitrage to short selling.

But its president, Ken Heinz, said that while most information comes in a few weeks after the close of a month, it can take up to four months to get the final monthly data from each of the funds it tracks.

"The way hedge funds report their numbers, is they do report with a lag," Goldman said. "It is really hard to tell in the last couple of weeks who is doing well and who is doing poorly. We'll probably get a better sense of that in early to mid-September when the August numbers roll in."

So what do those preliminary numbers show?