Hedge Funds Slammed: "Smart Money" Has One Of Worst Weekly Losses Since 2001

Tyler Durden's picture


Last week in the markets was all about what was happening below the calm surface waters, which saw the DJIA post a tiny increase and the S&P dip just a fraction. If one was going off merely by the two main indices, one would certainly have missed the drubbing that tech and specifically biotech stocks suffered. However, nowhere was it worse than in the "hedge fund hotel" basket of names most near and dear to the hearts of hedge funds, and respectively those most hated, one which Goldman defines as the long Very Important Positions <GSTHHVIP> vs. short Very Important Shorts <GSTHVISP>. It was here that P&Ls saw one of the worst weekly losses for hedge fund positions since 2001.

According to Goldman's David Kostin, the past week has been among the worst 5-day returns for GSTHHVIP relative to the S&P 500 since 2001.  

The past 5 trading days rank in the lowest 2% of returns since May 2001 and are the worst aside from the sharp market retreat in 2002, the 2008 financial crisis, and 2011 debt ceiling debate. A stable S&P 500 makes the current underperformance more notable."

Especially when after five years of underperforming the market, investors continue to ask themselves just what are they paying hedges 2 and 20 for - obviously it is not to hedge risk, in a market in which the Fed has made it all too clear a market downturn is no longer a possibility. It must be for the "benefits" of the herd effect of everyone loading up on the same positions, and when one sells, everyone sells and leading to sharp losses for the bulk of the "smart money out there."

What else: "Key stock contributors to hedge fund underperformance were longs in AMZN, GILD, DISH, PCLN, YHOO, and FB that are each down at least 5%. Favorite shorts such as SLB, T, IBM, JNJ and EXC are up more than 4%."

Where have we seen before? And, more to the point, where have we warned this would happen? Why here: "Presenting The Best Trading Strategy Over The Past Year: Why Buying The Most Hated Names Continues To Generate "Alpha"."

Finally, the good news: at least hedge funds, which apparently where whipsawed with a big position and pair trade unwind last week, are not levered to the hilt. Oh wait...



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Sun, 03/30/2014 - 15:24 | 4608218 q99x2
q99x2's picture

The hedge funds have  much more FED protection  than in 2011 and 2008. That is what the graph is showing. BTFD


Sun, 03/30/2014 - 15:43 | 4608256 SilverIsKing
SilverIsKing's picture

Stupid is the new smart.

Sun, 03/30/2014 - 16:01 | 4608297 Cattender
Cattender's picture

i'm buyng Silver Bitches!!!!! :-)

Sun, 03/30/2014 - 17:03 | 4608450 kaiserhoff
kaiserhoff's picture

Now that's entertainment.  Leveraged 30 to 1 it's gonna leave a mark.

  Thanks, Tyler.

Sun, 03/30/2014 - 20:35 | 4608990 NoDebt
NoDebt's picture

Oh, gimme a fucking break.  The graph doesn't even show what the story headline says.

"Among the worst".  Yeah, in 143rd position.

Sun, 03/30/2014 - 15:25 | 4608220 disabledvet
disabledvet's picture

you can hate me...but you'll hate the inflation more.
"burn baby burn."

Sun, 03/30/2014 - 15:26 | 4608221 Peter Pan
Peter Pan's picture

But did JP Morgan and Goldman Sachs lose money?

Sun, 03/30/2014 - 15:32 | 4608233 Roger Knights
Roger Knights's picture

"Where Are the Customers' Yachts?"

Sun, 03/30/2014 - 15:29 | 4608229 Black Forest
Black Forest's picture

Five days are well below statistical noise.

Sun, 03/30/2014 - 15:33 | 4608234 Soul Glow
Soul Glow's picture

Smart money is an oxymoron.

Sun, 03/30/2014 - 15:44 | 4608260 Fuh Querada
Fuh Querada's picture

These are pieces of paper or abstract digits in a computer just like FR "money". Try and use them to buy tangible assets.

Sun, 03/30/2014 - 16:03 | 4608302 B2u
B2u's picture

Who do I tell...FUCK YOU?  How about Goldman Sachs?

Sun, 03/30/2014 - 16:18 | 4608341 I Write Code
I Write Code's picture

Who is shorting JNJ?

Anyway doesn't matter what falls when the fed will make it up next week.  Just an odd cycle of accumulation and distribution, don't worry about it.

Sun, 03/30/2014 - 16:27 | 4608360 buzzsaw99
buzzsaw99's picture

how can allocation be bigger than aum? oh, snap!


Sun, 03/30/2014 - 16:51 | 4608430 BlueStreet
BlueStreet's picture

Ackman was probably at the top of the list with HLF rallying on Uncle Carl's new board seats and APD getting slammed.  

Sun, 03/30/2014 - 17:31 | 4608511 Heroic Couplet
Heroic Couplet's picture

Who cares?

Sun, 03/30/2014 - 18:29 | 4608650 Cacete de Ouro
Cacete de Ouro's picture

5 day performance of anything (vs an equity index) can't be judged as anything in particular. It's just random. If the prices of a handful of stocks, in a concentrated portfolio, go in a different direction to what was expected over 5 days, then this could be due to myriad reasons. It's absurd that anythjng can be judged over 5 days.

Sun, 03/30/2014 - 20:42 | 4609008 ATG
ATG's picture

Odds are next week bounces, LOL

Sun, 03/30/2014 - 20:51 | 4609030 SheepDog-One
SheepDog-One's picture

It doesn't take rocket appliances to know the smartest money play is go full retard....bet it all on the most money losing toxic sludge out there and you absolutely can't lose!

Sun, 03/30/2014 - 23:44 | 4609489 bam
bam's picture

where can you find an auto updating list of most short interest stocks? 

Sun, 03/30/2014 - 23:57 | 4609515 Judge Crater
Judge Crater's picture

Wait, I hear a noise overhead.  A lonely sound, a distant sound, the sound of Malaysian Airlines MH370 leaving the Dragon's Triangle and coming in for an emergency landing at Idlewild Airport.  That occurrence is as believable as the U.S. economy turning around and generating good paying jobs for Americans.   

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