Hedge funds AGAIN getting killed by Indexes
Just a follow up to an earlier post -- another report today on how the average hedge fund, YTD, is getting killed by indexes -- average hedge fund down 1 percent, vs. S&P index up 8 percent.
https://www.cnbc.com/2018/08/21/hedge-funds-are-s…
Just a question to the hedge fund people out there -- are you hearing more complaints/revolt from clients who are finally waking up to the fact that they may be overpaying (2-and-20) for inferior returns?
I realize you'll give them your "hedging" argument -- that hedge funds are primarily intended to limit losses in a down market, as opposed to beating them in an up market... but I would imagine they're getting fed up with this rationalization.
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Like you said, most hedge funds sold to institutions/HNWI aren't really aiming to generate alpha. I don't see why they are constantly being compared to indexes. It's like complaining your apple doesn't taste like a pear; no shit it doesn't taste like a pear.
Many HF aim to generate absolute return or lowe volatility.
Market neutral or L/S HF may have 0% net exposure so benchmarking against stock indices doesn't make sense.
Edit: I also recently read that if Berkshire Hathaway charged 2/20 since the beginning, returns would have been mediocre. So yeah, with fees you start from -2%
I think i know the article you refer to and its grossly inacurate.
http://castlehall.typepad.com/risk_without_reward/2010/10/buffett-versu…
the above link gives a good example and outline of why that is the case.
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