Wednesday, May 22, 2013

Good Company in Underperforming the S&P Year to Date

This article by Zerohedge shows that the S&P is up 15.4% and the average hedge fund is up 5.4% YTD.

Tyler Durden's observations are, as usual very interesting.  He points out that since the market has been steadily increase in 2013 because central banks have been buying stocks directly.  The hedge funds tend to make their gains on volatility which has been tampered by the central banks buying.

One can infer that the hedge funds have been forecasting a market decline.  Their forecasts have proven wrong.  So far . . .

Anecdotally, many hedge funds were invested in Apple at the end of 2012 which has dropped from $532/share to $439/share in 2013.  The John Paulson funds have been famously invested in gold which has taken a beating so far this year.  And, Philip Falcone's Harbinger Capital's infamously lost big in telecommunications.  We hear a lot about a few famous funds regularly.  So its good to see how the entire 'we deserve 2 and 20' industry is performing.  That is hedge funds typically charge clients 2% of invested capital annually plus 20% of gains.

Shutting down fraudulent hedge funds that achieved their gains with inside information must be hurting the industry average.  Both, by removing the cheating fund from the average and scaring others straight, or at least straighter.

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