A retail fund's brutal new year
If you think your portfolio is hurting, look at this hedge fund: a 16 percent drop in three days.
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| Slowing consumer spending is hitting some on Wall Street very hard. |
NEW YORK (Fortune) -- Just how bad is the stock market this month?
This bad: One hedge fund specializing in retail stocks booked an eye-popping 16 percent loss after the first three days of trading of 2008. The loss, at a Jefferies & Company (JEF) hedge fund, is proof that market woes go far beyond the well-known problems with mortgages and credit instruments.
The fund, Jefferies Asset Management's Jefferies RTS Cayman Ltd., posted the 15.97 percent loss as of January 4, according to a hedge fund database published by Swiss Bank Syz & Co.
The fund's relatively modest size - it manages $30 million, down from $50 million earlier last year, according to a former Jefferies trader - and narrow focus on retail equities probably worked against it, when the sector was walloped after holiday sales capped off a weak year in the retail sector.
The brutal start for the fund came after an already dreary 2007 for Jefferies RTS, which dropped 9.81 percent, according to the Syz & Co database. This is a massive nosedive for the fund, which booked robust 22.09 percent and 35.13 gains in 2006 and 2005, respectively.
Both Eliot Laurence, the Jefferies RTS portfolio manager, and Tom Tarrant, Jefferies spokesman, declined comment, and would not detail which retail equities the fund is involved with.
By nearly every yardstick, December certainly was a rough time to have a series of leveraged retail stock bets. The Standard & Poor's retail equity index dropped more than six percent over the past month, to 378.57 from 404 on December 18. Nor is this drop isolated, since in mid-December 2006 the index was just under 525.
While the Jefferies RTS fund hasn't publicly admitted to any one cause for the decline, weakening consumer spending and mounting consumer debt are the most likely culprits. Certainly the pair combined to drive holiday sales - which include November and December retail sales figures - to a slower-than-expected 3 percent growth over the holiday season, a five-year low, according to the National Retail Federation. The group expects retail sales growth of just 3.5 percent this year as opposed to last year's 3.7 percent figure.
If anemic numbers like that come to pass, the Jeffries fund is unlikely to be the only victim. 
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