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April 30, 2024
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Hey gc2019, I swear if I had a silver banana for every lonely thread I posted too I'd be richer than @compbanker ...
Fingers crossed that one of those helps you.
Generally speaking, PE out-performs HFs handily.
I don't know about a white paper, but one of the best HF in the world is Millennium, which grinds out a 14-ish percent return every year like clockwork. The best PE funds in the world do much better than that. Apollo in the 20s since inception. I think Blackstone is in the high teens.
True, though Medallion Fund at RenTech returns something like 40% after fees annually (from 1994-2014 was something like 70% annually), if we're talking about the "best in the world". Obviously an extreme outlier (THE extreme outlier?)
The returns the Medallion generated through 2014 were ridiculous, but stat arb has become very crowded. I know 2 Sigma's 5 year return cagr is well into the 30's. Wouldn't be surprised if rentech puts up similar numbers, but the days of 100+% returns in stat arb have to be largely over unless they really do have the magic juice.
Totally dependent on market environment. In recent years (really the last 30 years, minus a few hiccups), interest rates have been low and economic growth has been strong, so a levered long-only strategy benefitting from illiquidity discounts (i.e. PE) should outperform by a comfortable margin.
f things are more volatile, or debt markets are closed, you'd expect better results from strategies that remain market neutral, take alpha shorts, don't rely on leverage, etc. Hypothetically, HFs should be able to generate positive returns even in declining or volatile market environments that would negatively impact PE, although obviously this doesn't always play out.
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