The Connection Between Hedge Fund Losers in 1998 and 2008

An excerpt from a paper (PDF) worth perusing:

Two hedge fund crashes in 1998 and 2008 stand out. The occurrence of these two crises provides a unique opportunity to ask the question: Did hedge funds that underperformed in the 1998 crisis also perform worse in the recent crisis? We find that a fund’s return during the 1998 disaster strongly predicts its performance during the 2007–2008 crisis. In particular, a 1% decline in a fund’s return during the 1998 crisis predicts a 0.56% drop in fund return in the 2007–2008 crisis. The data show that many of the worst performers during the 1998 episode were again the worst suffering funds in 2008. This predictability in hedge fund performance across the two crises is statistically significant, and robust to controlling for a variety of hedge fund characteristics.

Trend followers on the other hand won BIG during both time periods. Isn’t trend following mentioned only once in the end notes of that paper (PDF)?

Note: Thanks to for PDF find.