For the third year in a row, hedge funds will underperform the market, this time by nearly 50%, having returned 5.15% through the end of November (with just equity funds +5.20% YTD), less than half what the MSCI World has returned. And while one can make the argument (not correctly) that a manager has to beat only a given benchmark, and not the overall market, the reality is that for virtually all LPs, seeing their money return well below the S&P not for one, not two, but for three years running, is about the last thing they need before they make a decision to fax in that redemption form.
Which also explains the quarter end levered beta-chasing now adopted by virtually every asset manager as gospel. The only category beating the overall market? Credit, at +11.67%. Hopefully this will explain to all those equity-pitching “experts” why frontrunning the Fed, by everyone including retail, is now the only game in town, and is funded by equity outflows (which just saw their 21st consecutive week of outflows YTD). The worst performing funds: CTA and Managed Futures. Time to shut down the “Superfund”? Finally looking at individual HF winners through the week ending December 14, the only question is whether Paulson Disadvantage Minus will end the year as the second or third worst performer. Sadly, it will hardly be able to recreated its whopping -52.64% from 2011 even if it tried in the next 2 weeks.
Latest HSBC report: