Friday, July 12, 2013

Hedge Fund Indictment – Weekend Reading

Hedge Fund Indictment – Weekend Reading

A friend of mine sent along a couple of links that demonstrates in simple prose and a couple of compelling charts the dismal performance of equity-related hedge funds.  Wealthy individuals and large institutions alike are looking for two ingredients when they pay big fees to hedge fund managers and move away traditional long-only managers.  First, they’re expecting to generate alpha or returns in excess of the S&P 500.  Second, they’re expecting the hedge funds to offer diversification from a traditional portfolio.  I’ve reproduced two charts that should dissuade any investor from aggressively pursuing equity hedge funds because neither goal is being attained.

Chart 1: Alpha Has Disappeared as Big Institutions Have Allocated to Equity Hedge Funds  
 Chart 2 -- The Benefit of Diversification Has Disappeared

For the full piece, “Hedge Fund Alpha is Negative; Down Around 1700 BPs in 11 Years” go to, which references recent research from Morgan Stanley.

If you’re up for four pages about the failure of the hedge fund industry, see “Hedge Funds Are For Suckers” at

No comments:

Post a Comment