Most Hedge Funds Underperforming The S&P 500 For Fifth Year In A Row - Full YTD Performance

Tyler Durden's picture

There is one problem with relentlessly ramping markets (whether due to four years of liquidity injections by the Fed, or due to four years of liquidity injections by the Fed) - they make all those who by definition have to be hedged, seem stupid by comparison. In this case, this means that for the fifth year in a row, the vast majority of brand name hedge funds are once again underperforming the S&P, even though most of them have shifted to the highest net long exposure in history, while charging their increasingly more angry investors 2 and 20 for the privilege of underperforming the most micromanaged asset of all - the S&P500, and its unpaid portfolio manager, Ben Bernanke. And while there are three certain things in life: death, taxes and Paulson being one of the worst performers in the world (perhaps he is moving to Puerto Rico not to avoid paying taxes but to escape furious LPs), as he indeed is for the third year running...

... what is most surprising is that through the middle of March, according to HSBC, every single brand name hedge funds is once again underperforming the S&P. And while hedge funds are supposed to be hedged in cases of "downside risk" one wonders - with the downside no longer a possibility thanks to the biggest asset manager of all, the Federal Reserve, does this mean hedge funds are no longer necessary?

Complete YTD performance via HSBC:

HedgeWeekly _11

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Perpetual Burn's picture

How about Real returns? LOL

Richard Chesler's picture

according to HSBC.

Nothing beats drug money laundering.

localsavage's picture

You missed a couple

McMolotov's picture

I weep for all the rich muppets getting fleeced.

Cdad's picture

Well, maybe if every single money manager in the business was not a total lemming, putting on 8 long individual equity positions and macro shorting the SPY...maybe one or two of them would not be a complete moron.  It's not just the FED [but it mostly is] that keeps ramping the S&P.  It is the unimaginative flock called Hedge Fund Managers...and their f'n group think.  There are far too many of them in the markets...which btw will once again be a big part of why the market will correct...and hard. 

You see, standards in America have fallen so low that any swinging dick who got lucky on an Amazon trade suddenly thinks he is smart.  Trouble is, he is NOT the "best and the brightest the nation has to offer", but rather an ego driven idiot who thinks he has the markets figured out [because he hired a computer programmer].

Thank you yet again, Ben Bernanke...for bailing out the financial services industry so that they could entirely destroy the capital markets with their 24/7 nonsense.  We thank you for this wasteland you have created for us.  I'm sure a nation wide hiring spree is just around the corner because you continuously fund stupidity.

disabledvet's picture

there is only one rule in the hedge fund world...namely "there's always someone else in the hedge fund world gunning for you." what does it mean to be a hedge fund manager? seems pretty simple actually: the job title "professional gambler" does stand out to me as well. "aces and eights" baby. there's always someone else gunning for you. call it a code if you like...but the only thing people really want to know is "are you really that good."

HD's picture

I feel sorry for the poor bastards that can't turn off their brains, accept the manipulation and just BTFD. All these hedge funds that are under performing have (or will) chase the indexes up only to get slaughtered when it all implodes out of the blue some random morning.


Cdad's picture

The imploding part has already begun...not in the index...but in individual names.  Take a look at charts of any of the following:  CTL, ULTA, CLF, X, VALE, CMG, JCP, LTD, PAY, AAPL, COH, TIF [or any gold mining stock]...and on and on.  Look at what happened to these names when they reported.  Most of them reported and dropped 20%.

If the hedge fund lemming morons would quit perpetually covering their short SPY positions, the market would suddenly find reality.  And as most of us know, reality quite literally sucks.  

Of course, it would also help "price discovery" if Ben Bernanke would stop chucking 1-5 billion out of thin air dollars at this herd of stupidity each and every day...but I'm hearing Ben is really quite convinced that he is "helping the economy."  And I'm sure their are some Americans who believe that is what he is doing.  Those are the Americans who talk to Jay Leno on the street, and answer questions like, "How do you feel about the first black female presidential candidate's chances to beat President Biden this year?" ...answering, "Oh, I don't like Sara Palin."

And then there is the rest of in Ben Bernanke's wasteland....

Cdad's picture

Indeed.  Perhaps, like IPOs and new equity issuance, Ben's counterfeiting might have to be paused due to "market conditions."

Imagine that...somewhere out there, there is a tiny little sliver of a market left, struggling to breath, waving its hands, responding to supply.  Oh oh...however will Wasteland Ben respond to this free market remnant?  We shall see.....

HD's picture

"Imagine that...somewhere out there, there is a tiny little sliver of a market left, struggling to breath, waving its hands, responding to supply."


swissaustrian's picture

CTAs are gonna shine once we get a crash. They're the only real "hedge" funds.

TrustbutVerify's picture

Take another look after the next correction.   

random shots's picture

Most Hedge Fund managers underperform the S&P500 without insider information. 

Cdad's picture

That's because there are far too many of them...and each and every one one of them thinks they gots this market thing licked...'cause their computer programmer told them so. 

Yen Cross's picture

 'Third Point Offshore' @ 7.86% ytd. Why am I not surprised?

Fuh Querada's picture

Considering the size of Hendry's mouth, Eclectica hasn't been so hot.

toys for tits's picture

If mouth size and hubris had anything to do with it, Ackman's Pershing Square should be heads and shoulders outperforming anyone else.

It's down .5% through the end of Feb, which is before the big moves happened in two of its holdings HLF and JCP.

The scumbag is trying to get the feds to do his dirty work.

buzzsaw99's picture

pension funds will keep paying them 2 and 20 because they are stupid as hell and don't give a damn either. basically when you "invest" with a hedgie they keep all the gains and you keep all the losses.

Rustysilver's picture

So, does Paulson understand the meaning of the word Advantage.

Advantage to whom?

Brokenbroker's picture

The 2 and 20 is laughable for so many but the truth is if u have the funds and are loaded up on some pm's (physical) and are investing in financial assets u would be best served roatating into a stable of good hedgefunds here instead of bonds and equities. Stocks are do for a crash and bonds have a negative expected return over the next 6-7 years. No one that seriously invests in hedgefunds expects them to keep pace in ripping markets. While not perfect they can be a good option. Probably do well in long duration for the next 3 months or whenever the data goes soft. If u look the data is cyclical like a sine function and hqs trended lower. This last low was negative in the late summer/fall and now everyone is taking the latest bump as the economy beginning to take off but more likely to rollover after hittkng a lower high. Thus heading to lower lows this spring and the global economy looks like it is pretty synced up in the same way. China japan europe and the us all kinda bounced but instead of the data going up and up appears to be peaking or rolling over and disappointing across the globe. Germany ip china ip japan machine orders all of europe ip indian ip all while i flation is picking up everywhere. It is exactly as bass talked about and tyler. Costpush inflation surprising to the upside while ip disappoints. We know about the car and foreclosure stuffing but it can only be hidden fr so long. Bloomberg headline is car sales cool in feb to 2009 levels yet dow was up and ford was up. There might be one last positive run if they have a well timed agreement on sequester to put off forever but reality will hit within 6 weeks. Market tops within 6 weeks. And that will be the top. But no crash till the right shoulder forms of the head and shoulder with the 2013 april top as head. Then once yhat rolls over it becomes apparent that 2013 is the right shoulder or the triple top of a massive formation and then it all comes apart. But data needs to surprise hard here to the downside and it will but not for 4-6 weeks. Then it gets ugly.

hooligan2009's picture

broken record and spell chaecker too :>)

i think his name might really be broken macro man

Cdad's picture

There is this's called a paragraph.  Try it.

babylon15's picture

Warren Buffett is also underperforming the S&P 500.  Who is benefitting if it's not retail, not hedge funds, and not Warren Buffett?

Cdad's picture

Who?  Great big zombie banks.  You know...the guys who are holding all the equities put back to them by every single average Joe in the country...who has been selling the crap out of his IRA....because he knows that it's a joke.

Why do you think Ben Bernanke keeps printing money and giving it to these dead institutions?  Keeping up the appearances of "everything is fine" and floating the asset value of JP Morgan.

Nice wasteland, Ben!

HulkHogan's picture

I read his report the other day and saw that too.

DowTheorist's picture

When the market undergoes a long uptrend, it is normal that most money managers underperform, especially trend followers.

Trend following outperforms the market not by making more in good years, but by losing less in bad years, as explained here.


electricgorilla's picture

Rehypothecation comeback to a 10-year treasury note in a repo market near you. With bank powers combined, can they become Captain Planet and save us from this collateral crisis? Does a collateral crisis exist? Stay tuned. 


chindit13's picture

Few can outperform a rising equity market, because there's always a portion of a fund in cash.  In a ZIRP world that natural lag is exacerbated.

If there is one fund on that list whose daily run I'd like to see, it's Tudor.  That's pretty damn impressive performance YTD, and Paul Jones has a nose for major market turns.  When he switches to net short, I'd want to be short, too.

cjbosk's picture

It's been costly to be thoughtful I suppose.  Can't think too much in a monetary debasing ramp job of mythic proportions.  


I have hedge fund exposure and it has underperformed for years but I sleep better with it right now.  I'm not one to rest well being "long and strong" if you know what I mean. 



EclecticParrot's picture

But do we even need to ask whether Goldman's HFT desk beat the S&P ?  No way could volumes remain this low if large pension funds were making major reallocation shifts (unless such committee-approved changes are awaiting a 'pullback' for implementation, such as Friday's shocking plunge), so the index perf has to be the algos goosing modest-sized shorts placed just above the upper pivots each day, as short-covering by bigger players would have produced more of a 'blow-off top', and this seems more like a blow-job top -- computers doing favors for each other.

kevinss's picture

While it likely wouldn't change the main point, some of these fund returns are not through march 8th, the sp500 is. And as the sp500 is up nicely over the preceding weeks, it's an unfair comparison.