In the aftermath of the Bernard Madoff allegations, the performance of the troubled hedge fund industry may emerge to be even worse than previously thought, with the market neutral sector now showing a significant loss year to end November, rather than the small positive return previously shown by Credit Suisse/Tremont data.

The Credit Suisse/Tremont hedge fund index had previously shown a 0.85 per cent return for market-neutral funds between January and the end of November, but has since restated figures to show a loss of 40.56 per cent.

In the revised figures the loss shown in the market-neutral index was 40.45 per cent for the month of November, compared to 1.83 per cent in October.

Credit Suisse/Tremont’s market neutral index included Fairfield Greewich’s Sentry fund and Kingate Global, two “feeder” funds that had invested money with Mr Madoff. 

Oliver Schupp, president of the Credit Suisse/Tremont index, said: “The unexpected events around Kingate Global/Fairfield Sentry have had material effects on the performance of the equity market neutral sector, and therefore have also impacted the Broad Benchmark Index. Considering the information we now have concerning Kingate Global/Fairfield Sentry, assets under management for the funds have been marked down to zero for November.”

As a result of the re-calculation of market neutral data, the returns for all hedge funds show a loss of 4.15 per cent during November, rather than the gain of 0.7 per cent previously stated in the Credit Suisse/Tremont index.  Year to the end of November, hedge funds were found to be down 19 per cent, compared to the previous figure of 16 per cent.

Meanwhile, it is thought that several funds of hedge funds are also exposed to Mr Madoff’s dealings.  The Financial Times, citing people familiar with the matter, reported that Tremont itself, which is part of OppenheimerFunds, has $200 million in a fund of hedge funds that placed money with Mr Madoff.