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After June Rout Average Hedgie Returning +2.5% In 2013, Underperforming S&P By 80%

Tyler Durden's picture




 

For hedge funds, June was the cruelest month (so far).

As Bloomberg reports, the crowd of levered beta chasers hedge fund world was pounded in a month in which the centrally-planned boat nearly keeled over as everyone moved from port to starboard. "Hedge funds posted their biggest monthly loss in more than a year after signs that the U.S. Federal Reserve may scale back its unprecedented stimulus triggered a selloff across global markets. Hedge funds lost 1.4 percent in June, the most since May 2012, paring the gain in the first six months of 2013 to 1.4 percent, according to data compiled by Bloomberg. Hedge funds that use computer models to decide when to buy and sell securities slumped 6.3 percent last month, extending losses for the year to 7.1 percent, and emerging-market stock funds declined 6.6 percent, leaving them down 9.7 percent in 2013."

And visually from Goldman, or the futility of paying 2 and 20 to underperform a centrally-planned market by 80% (not to mention constantly being crushed by idiot-money mutual funds) for the fifth year in a row:

Which once again brings up what we discussed in "Ben Bernanke Crushes Hedge Funds: Average Hedgie Underperforming S&P by 65% In 2013"

Here is the problem: having underperformed the S&P for five years in a row, many LPs are starting to get tired of not only underperforming stocks but paying out 2 and 20 on all the lost upside (and not only due to such leftfield surprises as RICO Stevie).

 

The bigger problem is that by the time the crash finally comes, there will be no hedges left as the Federal Reserve will have made sure all shorts get crushed as confirmed by the relentless outperformance of the most shorted stocks relative to the market (and why we continue to suggest quarter after quarter that going long the most shorted stocks is the most lucrative "alpha" strategy) as "hedge" funds abandon all hedging in droves and become "long-onlies", a problem further compounded by the fact that when the real crash does come not one hedge fund will be positioned properly and able to generate any alpha.

 

The biggest problem, at least for the active management community, is that with the global central banks now stock market activists and buying stocks outright, it is they who have eliminated the downside risk and by implication made hedging redundant.

In summary: when the world's central banks are now in the business of managing risk for mom, pop, the E*trade baby and Johnny 5, hedge funds are completely worthless.

 

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Mon, 07/08/2013 - 08:24 | 3730295 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Were all the hedge fund managers absent from the BTFD meeting?

Mon, 07/08/2013 - 08:25 | 3730301 malikai
malikai's picture

No, but they were absent from the FRB meetings.

Mon, 07/08/2013 - 08:42 | 3730336 knukles
knukles's picture

Step 1. Borrow boat load of money on margin at 2.5% or so.

Step 2. Buy boat load SPY levered 80% with said borrowed money

Step 3. Ride rally

Step 4. Collect 2 and 20

Step 5. Retire filthy rich

Who'd a thunk?
Hah ha ha ha
Dumbfucks musta thought they could produce Alpha!

Mon, 07/08/2013 - 08:25 | 3730297 thismarketisrigged
thismarketisrigged's picture

here is what this week will look like.

 

monday and tuesday- markets on no volume will hit record highs. on what you ask? NOTHING whatsoever.

 

wed- markets will be flat entire day up until 2 pm when fed minutes are released. markets will then drop a few pct points on taper talk.

thursday and friday- mr bullard and mr dudley, and a whole lot of fed members will come out and tell us how we ''misunderstood'' the fed minutes and the markets will hit new highs.

 

so predictable

Mon, 07/08/2013 - 08:31 | 3730311 SheepDog-One
SheepDog-One's picture

Good Fed propaganda/Bad Fed propaganda game now. 

 

Mon, 07/08/2013 - 10:19 | 3730583 WeekendTrader
WeekendTrader's picture

If it is so predictible you'll be able to make boatloads of money....

Mon, 07/08/2013 - 08:25 | 3730298 Sudden Debt
Sudden Debt's picture

Those who are making loses did it to themselves!!!

NEXT TIME YOU PAY OBAMA'S PROTECTION... contribution... MONEY!!!

Mon, 07/08/2013 - 08:28 | 3730305 SheepDog-One
SheepDog-One's picture

Right there's no downside risk, Uncle Ben's GOT this shit....so no further need to position for a shitstorm they abolished that.

Mon, 07/08/2013 - 08:31 | 3730309 Seasmoke
Seasmoke's picture

Is Congress in the Hedge VIP fund ???

Mon, 07/08/2013 - 08:51 | 3730356 Devotional
Devotional's picture

Yep, no inflation ... 68 EURO to fill my compact car's gas tank. Yep, inflation ... it's in my mind.

Mon, 07/08/2013 - 09:13 | 3730407 runforthehills
runforthehills's picture

remuneration of hedge funds = fair debate (especially the fixed fees) 

but don't be too smug ZH, as your long gold, short stocks recommendations for the past couple of years don't exactly put you in a comfortable spot right now..

Mon, 07/08/2013 - 09:18 | 3730423 lemarche
lemarche's picture

THE "20$ GOLD PREMIUM" ARTICLE WAS PARTICULARLY TELLING (WHEN GOLD WAS LOOSING ABOUT THAT ON 15MIN CANDLES..), IN NOTING THAT ZH HAS TILTED TOWARDS THE CNBC OF BEARISHNESS... STILL SOME GOOD ARTICLES BUT A BIT MORE OBJECTIVITY WOULD BE WELCOMED I BELIEVE. I AM A TRADER, FUNDAMENTALS ONLY MATTER THAT MUCH..

Mon, 07/08/2013 - 09:45 | 3730483 runforthehills
runforthehills's picture

absolutely..

besides, ZH are probably the last viewers of CNBC at ths point

Mon, 07/08/2013 - 09:49 | 3730494 Downtoolong
Downtoolong's picture

Nothing like being Tapered and Teppered at the same time. It’s like a left jab followed by a right hook.

Mon, 07/08/2013 - 09:51 | 3730500 greatbeard
greatbeard's picture

Dear hedge fund guy.  Want to feel better?  Call me, I'm a gold bug.  I'll tell you my tale of woe. 

Mon, 07/08/2013 - 12:29 | 3731020 Itch
Itch's picture

I find it hard to believe that people are queuing up to funnel massive amounts of funds into these accounts; little old me made 18.3% last quarter trading only two Euro pairs. Maybe they should stop trying to be scoundrels and start putting in the hours in front of the screen, rather than pissing about at the golf or tennis court/bar/whore house. I don’t buy it that these guys are working hard and performing that poorly; i just think they're all parasite bullshitters dining out on past glories and other people’s hard-earned cash. Proper spivs.

So what's going on here? Top hedge funds cant understand how to take advantage of central planning? The easiest money that could have ever been made? AKA Ben says up and it goes up, Ben says down and it goes down? Maybe im missing something here.

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