FYI: When I began this column in the spring of 2013, one of my early submissions chided hedge funds. Called "Hedge Fund Follies," the article showed that over the previous seven years--a full market cycle, in that it covered the runup to the financial crisis, the collapse, and the subsequent recovery--every category of target-date mutual fund had outgained hedge funds of funds, or HFOFs.
The underlying hedge funds that are owned by HFOFs fared little better. Over that same seven-year period, most hedge fund categories trailed their mutual fund equivalents. For once, man had bitten the dog; the bottom 99% of investors had bested the top 1%.
Five years later, things look worse rather than better.
Regards,
Ted
https://www.morningstar.com/articles/883298/will-hedge-funds-ever-recover.html
Comments
When this market turns you're going to see a lot of disappointed investors throwing the blame at indexing. They may not be for everyone as every investor has it's own tolerances and needs, but hedge funds will prove beneficial again.
We will then see money flock to them at the worst possible time and they'll subsequently lag again. It's a never ending game of investors chasing returns.
But these whip-saws in investor sentiment appear to be getting more pronounced. Suspect that’s largely due to the ease of accessing stock, bond and index returns, along with 1-year, 3-year etc. fund performance. These numbers serve to reinforce investor perceptions of where the “best” returns can be achieved (classic case of elephant chasing tail).
I’m sure in his/her own mind, 100% of investors chasing returns believe they will be able to “get out in time” when the carousel finally stops. While I know that the odds of everyone exiting equities (or a particular index) all at once is effectively “0”, I’m afraid it would take someone of @msf’s brilliance to explain why 100% of investors can’t all sell at the same time (and thereby save their skins).
Agree that hedge funds usually (but not always) diversify widely and exercise a cautious approach. Neither of those qualities has served investors well in recent years.
https://www.thebalance.com/who-invests-in-hedge-funds-and-why-3306239
Doesn't appear to be your average, everyday investor except by extension (i.e. pension funds, unions).
(sorry...)
Derf
Very informative link. To be clear, neither JoJo26 (I think) nor I intended to promote hedge funds. I don’t pretend to be knowledgeable about them. I was going to note that RPGAX has $640.20M in investor assets, 10% of which the fund invests in a hedge fund. But your linked article hits upon this. That would be correctly termed an investment by an institutional investor.
I think the point JoJo was really making, and which I echoed, is that the big investor gains have in recent years been narrowly focused among a few specific hot sectors. So, instead of singling out only hedge funds, one might also wonder: Will value investing, diversification, alternative assets, or emerging markets ever recover?
In researching the topic further I stumbled across this old MFO thread. It’s getting bad when your Google search turns up a piece to which you yourself contributed. (Truly the blind leading the blind)
https://mutualfundobserver.com/discuss/discussion/40315/rpgax
Hank - my only reason for commenting was a roundabout way of saying that most readers here probably do not use/invest in hedge funds. I do however follow a few of the managers of same.
I'm gonna lose it anyway
The losing card I'll someday lay
So this is all I have to say
Suicide is painless
It brings on many changes
And I can take or leave it if I please
@Old_Joe, Let me say at the onset that Maurice was the first board member ever to respond when I posted a question (on Fund Alarm, of course) about 15 years ago. His answer was helpful, but more importantly, helped draw me into the FA / MFO circle. I’m eternally grateful.
I miss Maurice as one of the really genuine voices here. Some of the political responses on the board strike me as either “unthinking” (programmed) or not even genuine. But I think Mo firmly believed what he professed. You and I disagreed - but he is someone I at least found it possible to listen to and take seriously.
Your passage is likely be misunderstood by some. Seems to me you’re bemoaning the fact Mo decided to leave rather than deal with some of the flack he encountered. Perhaps he’s landed someplace where he’s more comfortable. I will say that here I’ve learned a lot more about people and getting along in this world over the years than about money. We all take our lumps from time to time. But out of that growth may occur.
Since he's left, those sorts of extended bitter political exchanges have really tapered off, it seems to me, and for the better, I think. Not happy to lose him- just relieved at not having to respond to aggressive political attacks.
Regards,
Ted
Matthews Asia Funds reduces minimum for I...
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Maurice
08-29-2018