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Back in early October I posted a blog in which I argued that treasury type securities had taken over the role of hedge funds as an asset class that was almost totally de-correlated from the rest of the market. I also remarked that it was still too early to jump to any conclusions given that there still remained roughly 3 months before the end of the year and that anything could happen until then.
Well, here we are again, roughly a week before the year ends, to asses the performance of the various asset classes. The graph in this blog is more comprehensive as it includes a larger number of asset classes and other instruments (commodities and hedge funds are technically not considered to be asset classes).
My first observation would be to highlight treasuries that have produced the only positive performance for the year. All the remaining asset classes which include global stocks, commodities, global real estate and hedge funds have been overwhelmingly negative. Hedge funds have lost somewhat less than the other asset classes but still a whopping 25% of their value (an average figure) has vanished into thin air, making it one of the worst years in hedge fund history.
What is even more astonishing to note is that the performance of treasuries are almost a mirror image of hedge funds. A cursory glance would suggest that the correlation is almost perfectly negative although in reality hedge funds have lost significantly more than the amount that treasuries have gained!
Notice also how commodities have shed all the massive gains it had accumulated up until the middle of the year. The monumental losses have brought the performance of commodities in line with the worst performers in the list (stocks and real estate).
This has been a year full of surprises (I mean who would have thought that treasuries would have been hoarded and that commodities would have posted records both on the upside and downside?). One can be confident that the performance picture for next year will probably look very different from those of 2008!