Are HF returns always measured against benchmark?
Saw a post a couple years ago saying Citadel was ‘+20%’ on their wellington fund. Apparently S&P was up 30% that year.
does that mean the fund returned 20+30% that year, or rather underperformed the S&P by 10%?
If the latter, what is the point? Was seeing some equity funds returning like 6% which is nearish the RFR. I get there is ‘no-correlation’, but is it that significant to be chosen over RE/PE/LO?
Not always. HF returns are absolute, while mutual funds are relative
Oh course they are absolute.
Why would they deduct S&P performance ? Do you deduct S&P performance from any of your investments ?
Why do u compare HF returns to S&P returns ?
20% is a great year for all asset classes ! So I am sur every Citadel investor was really happy that year.
Large pension funds and other institutional invest mainly on equities and bonds, but also allocate a part on alternative investments including HF
Reason is diversification and drawdown reduction.
If you are ready to see your retirement fund lost 20/30% during an equity drawdown, because you think S&P will overperform on the long run, most people don't like that. Especially when we talk about retirement money, that people really count on and can't afford lose. Hence pension funds have risk limits that prevent them from investing 100% on S&P500 and so HF and other uncorrolated asset classes are part of their portfolios.
And yes somehow PE and RE can be seen as competition for HF as they "fight" for the same allocation pocket from pension funds.
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