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00:00YOU PUT OUT A GREAT STORY. WHY HAVE THEY HAD THE WORST YEAR SINCE 2011? WHAT HAPPENED? GUEST: THE STORY OF 2018 IS THAT YOU CAN SAY ANYTHING ABOUT HEDGE FUNDS AND THAT WOULD BE TRUE. THE MAIN CULPRIT IS RISING VOLATILITY. HEDGE FUNDS WAITED FOR YEARS FOR VOLATILITY TO SEARCH. IT MADE MATTERS WORSE FOR THEM. IT STARTED IN FEBRUARY, WHEN SHORT VOLATILITY TRADES IMPLODED. THAT SMASHED HEDGE FUNDS. OCTOBER WAS ANOTHER BAD MONTH. DECEMBER, THAT WAS TERRIBLE. IT WAS AN EXTRAORDINARY MONTH. IF YOU WERE FLAT IN DECEMBER, THAT WOULD BE CONSIDERED A GOOD -- WHAT TROUBLED HEDGE FUNDS WERE A COMBINATION OF FACTORS. VOLATILITY IS ONE. RISING POLITICAL RISK, TRADE WARS, AND THE COMBATIVE STANCE OF DONALD TRUMP DID NOT HELP HEDGE FUNDS. NEJRA: IS THERE A COMMON THEME FOR THOSE WHO DID WELL? GUEST: ANYONE WHO HAD LESS EXPOSURE TO MARKETS, ANYONE BEHAVING LIKE A HEDGE FUND REALLY DID WELL LAST YEAR. CHRISTIE NORRIE, FOR EXAMPLE, HELPED HIM. THERE WERE SEVERAL OTHER HEDGE FUNDS THAT MADE A LOT OF MONEY. NEJRA: SHOULD WE EXPECT MORE OUTFLOWS THIS YEAR? HOW WILL BE DIFFERENTIATE WITHIN THE INDUSTRY IN 2019? WHAT THEMES ARE YOU ABLE TO PICK OUT? GUEST: HISTORY SHOWS THEY DO, WE SHOULD EXPECT MUCH HIGHER OUTFLOWS THIS YEAR. ALREADY THROUGH NOVEMBER, WE ' VE SEEN $15 BILLION LEAVE HEDGE FUNDS. IN CONTEXT OF $3 TRILLION, THAT ' S A TINY AMOUNT. BUT THAT BASE IS ACCELERATING. SOME OF THE VERY WELL-KNOWN HEDGE FUNDS HAVE NOT DONE WELL LAST YEAR. THAT ' S A BIG DENT FOR THE INDUSTRY. I WOULD IT TO BE SURPRISED IF -- I WOULDN ' T BE SURPRISED IF OUTFLOWS -- NEJRA: WILL IT WORK THIS YEAR? GUEST: IT WAS NEXT. MAYBE IT SHOULD, IF A VOLATILITY IS COMING BACK. IF THEY DO WHAT THEY PROMISE, THEN IT SHOULD BE A GOOD YEAR FOR HEDGE FUNDS.

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Hedge Fund Winners and Losers in 2018

Hedge funds are reporting their 2018 performance and a chasm has emerged between managers who have outperformed and those who saw staggering losses. One bright spot was Ray Dalio's Bridgewater Pure Alpha fund which saw returns of 14.6%, though many of its peers didn't do as well. Bloomberg's Nishant Kumar reports on "Bloomberg Daybreak: Europe." (Source: Bloomberg)

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