The Death Of Hedge Funds?

Tyler Durden's picture

With the very largest and most experienced of hedge fund managers vociferously commenting on the "Truman Show" mirage of the markets, the danger of currently policies (there is no way to tell exactly how it all will end. Badly, we guess), and the need for stock-picking prowess, we thought the following chart might highlight the dawning of the death of an entire substrata of so-called hedge-fund managers (and not just the $0 AUM newsletter publishers) who appear unable to "stockpick" their way out of a Fed-provided paper bag. Since Q4 2010, Long/Short funds are down 6% while the immutable low-cost levered wealth creation policy vehicle of choice for the Fed (the S&P 500) is up almost 50% (dividends aside).


There's "hedged" funds and then there's this...


Which is not surprising given what we previously noted...


Hedge fund managers have become high cost version of their index-tracking ETF brethren...


And performance advantages have dwindled...

as style tilts (growth vs value for instance) have seen increasing correlations...

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Dr. Engali's picture

I'm sure CNBC can find a spot for them somewhere. They could make stock recommendations and pontificate on the markets. Just imagine the show you can have with a person of their experience...... Oh wait..... Never mind.

MontgomeryScott's picture

I hear that Kramer is pumping hedge funds (as well as Maria Bartrilomo, on the airplane, wishing to join the 'mile high' club).

Not Too Important's picture

What happens when the hedge funds fold, and the $2 tril AUM goes looking for a new home?

That's a lot of velocity in a potentially short amount of time.


NoDebt's picture

Long/short.  Bad strategy when only the long side performs.  Oh, and 2/20 fees sucking your blood the whole time.


Xibalba's picture

I'm starting a newsletter where I trade on paper and sell the 'edge' to savvy mom and pop institutions.... I'm gonna call it Edge-eye, or maybe Hedgeguy... 

Government needs you to pay taxes's picture

Oh great, a slightly less greedy version of hedge fund with even less accountability.   Lemmie guess, Edgeeye comprises a bunch of former sell side analysts and a money manager or 2.

When the game is rigged more than a casino, why play at all?  And why would you pay some bozos for their insight, when the only thing that matters is how much the central banks are going to buy that day.

Here's a hot tip: buy on Tuesday.  I won't even charge you an e-zine subcription for that.

babylon15's picture

I think a better point is that the Federal Reserve now has over twice as many assets as all hedge funds in the world combined.  Federal Reserve balance sheet is sitting at 4.3 trillion while total US Hedge Fund balance sheet is sitting at 2 trillion.  The difference is that the hedge funds have a variety of opposing strategies while the Federal Reserve has only one strategy: buy 10-year equivalents with leverage.

Oh regional Indian's picture

Hedge Funds never die.

They just fade away into the black pools that created them in the first place anyways.


Life and Death

falak pema's picture

they are supernovas! 

remember, shadow banking was a Reaganomics invention dating back to the 80s.

HF are financial conquistadors doing 'Market God's work'; their original model died when the Habsburg empire died and the Spanish Inquisition became all mouldy like the divine caste system. 

Yen Cross's picture

 Those "20" somethings living in lofts and basements on borrowed equity from their 1% entitled MOTHERS?

  FTWQ I love My Mother! Happy Mothers Day Mom.

  Get creative. Your " Middle Class" Moms are SPENT!

navy62802's picture

Hedge funds didn't die after the 2007 financial crisis. It will take much more dire circumstances (as hard is that might be to imagine) to kill them. Unfortunately, the dire circumstances necessary to kill them will result in widespread misery throughout the United States and the world. The same could be said of many of the bad players in the current economic environment.

I, for one, am willing to endure significant economic hardship in order to ensure that future generations will not be enslaved. However, I am among the minority. Or I guess a more accurate statement is that I am not among the financially elite. After all, it is the elite who control future economic progress. I just sit here amassing weapons, ammunition and supplies.

fonzannoon's picture

you seriously believe that you enduring economic hardship will ensure that future generations will not be enslaved?

MontgomeryScott's picture


Do you seriously believe that the current economic situation will NOT ensure that future generations will not be enslaved in paying back these debts and losses?

navy62802's picture

I can't say for sure whether future generations will endure economic slavery after said efforts.

However, I can say for sure that without said efforts to fight economic slavery, future generations will be enslaved as mine has been.

Besides. I'm gorging myself on a tremendous fat-ass pizza right now. I would hardly call myself "poor" or "underprivileged."

However, I have seen parts of the world where the amount of money I earn in a day exceeds the amount of money earned in a year. I know what it means for one person to be subjugated to another ... in a way that most American's can't comprehend. What I hope is that this misery reaches the United States. Because if it does not, we are headed straight into the jaws of fascism. We are already well on our way, barring extreme circumstances. And therefore, the future that the US faces is either fascism or tremendous economic pain. Choose your poison.

Not Too Important's picture

There won't be future generations. Fukushima has seen to that.

There is a limited amount of generational time to stripmine what is available, before total collapse and oligarchy flight.

That is the only plan.


Here's a glimpse. All nuclear power plants, whether operational or inactive, require core and spent fuel pool cooling 24/7/365/10 billion years. As Fukushima becomes too radioactive to support cooling system staff, what fuel is left burns. As this fire gets larger, the next facility south becomes too radioactive to support cooling system staff. Without properly monitored and maintained cooling systems, those cores and pools explode and burn. As that second facility burns, the next facility begins the same process.

In the meantime, there are less and less qualified nuclear workers to staff these NPP's, let alone anyone that is willing to work there for any amount of money.There is certainly no line of foreign nuclear qualified workers waiting for work in Japan.

The failures of NPP cooling systems will spread like a cancer, with no end in sight, now beginning in Japan, then North America, then the rest of the world.

Welcome to Hell.

UselessEater's picture

slow kill  perhaps....profiting big pharma and probably excusing future cancer claims against Gates & cohorts - who knows - these creeps overtly doctor so much "science" and information .......anyhooo u know the chess strategy is more complex otherwise the other PTB charades designed to bankrupt and destroy the west wouldn't be required.

every day the west looks more and more like Mugabe town,,,he sure broke over several decades a functioning bread basket with industrial capability ......ever so peacefully and democractically (sarc)

Tenshin Headache's picture

You've got the right problem, but it may be triggered by other causes.

Radioactive contamination is a concern, but of greater concern (to me) is that all these plants worldwide require a supply of diesel to maintain cooling in the event of a power grid shutdown. An EMP attack or collapse of the financial system would make obtaining the diesel and transporting it to the NPP sites a bit of a challenge in the face of economic and societal collapse. Even if the plants are shut down they would still require ongoing cooling for spent fuel pools.

There is your extinction level event ... dozens of NPPs worldwide burning for decades. And, as you suggested, too hot to approach.

Aussiekiwi's picture

Well, aren't you a cheery optimist, personally I'm looking forward to going fishing for three eyed fish.

MontgomeryScott's picture

A year or so back, I read an article that described the bubble that is 'hedge funds'. If ALL the notes were called, the total amount was approaching ONE QUADRILLION feds. YES, you saw that correctly.

Fucking Monopoly players, using shit to buy and trade shit that ain't SHIT, and whining about the real losses to their pocketbooks (while destroying nations and economies in the process).

What is the name of the guy that hedged his bets that the value of the British Pound would tank, causing it to fall, and in the process, making a shitload of fiat, a few years ago?

Arius's picture

it was more than 20 years ago ... but it was different then, there were only a few hedge funds ... now, is every john, scott, tom, harry and their moms ... only quadrillion, well that is optimistic, i thought was much worse than that ... it does not really matter when you talk these kind of numbers if it is 10, 100 or 1000 quadrillion, just invent another name for it, thats all...

MisterMousePotato's picture

Hard to imagine anyone on this forum who doesn't know, but the name is George Soros. Darling of the left. Everything he says has to be filtered, first and foremost, through this. (Sorta like Sharpton and Freddie's Fashion Mart.)

Unknown Poster's picture

Collecting 2 and 20 for P&G might not be the best strategy. The Ira Sohn Hedge Fund Pitchfest

MontgomeryScott's picture

The ALPHA chart, baby!

Time correlation, especially around September, 2001.

The STOCK BUBBLE, in mid-2000.

The rise after 'The Messiah', and his first selection.

Nothing happens by coincidence. HFT's. Suckering the 'general public' in to 'retirement accounts' that yield 10% plus, while free to bet.

Betting that the value of a tranche of bad home loans will perform/underperform. Betting that the value of UAL and AMR stocks will tank in September '01. Betting that the price of oil will rise/fall. Betting that the value of companies that make airport scanners will suddenly rise. Betting that the weather will get better/worse (while being in control of those that spray the skies). Betting that the Lakers will win the championship.

BETTING with other people's good faith money.

GOD DAMN 'hedge funds'!

Ah, it's just a wet dream, I suppose: the dearth and death of these maggots that suck the life-blood out of the entire economy, and murder without conscience.


Yen Cross's picture

 You Bitchez  had better call your Mothers!   or i'm gonna kill you

  Single Mom ?


  I'll bet my downvotes were from " Females"  

  Like I care?

MontgomeryScott's picture

"Single Mom ?"

Um, NOPE, dope.

"Like I care?"

UM, yeah, I think you do.


Oh, by the way, fuck you, and come and try it, bitch.

Yen Cross's picture

 I'll rip your heart out in front of MY Mother ! Bitch

MontgomeryScott's picture

Let's go, slut.

I always like the look of one who sees death, as I take the life from him. They usually wriggle, and the last throes of the struggle are kind of fun to watch. I get such a rush...

Your mother? SHIT, you faggot, leave your mother out of this! Does your mother like her baby boy to be involved in a death-match in which you will lose? Does your MOTHER want to see her baby boy DIE?

EVERYONE'S mother is sacrosanct (except YOURS, apparently, you sick, twisted fuck).

Yen Cross's picture

 I'm confused> Would you like your card delivered in your car or house?

  Joe's explosions , Inc.

Ralph Spoilsport's picture

Another Friday Night on ZeroHedge LOL!

UselessEater's picture

lets agree to call Mom on Mothers Day

flowers might be nice

Freebird's picture


A year or so ago Cross you were spewing emotion that your mother had just died, although the Zh forum was hardly the place to share lol.

So which is it? Did your mother die or was it another cry for attention?

Reading your posts these past couple of fridays especially seem to point that you have a severe alcohol or substance problem or are in dire need of professional help or maybe both.

Your cut & paste, brown nosing to other posters & yahooish populist comments are worthy of the down votes you attract in addition to your blatantly sociapathic outburts.

Get help little trader & be well.



Relentless101's picture

That is very big gap...

babylon15's picture

what happens when there are no hedgers left?  boom.

MontgomeryScott's picture

This site is named 'ZERO HEDGE'.

As in 'NADA', 'NO', 'LESS THAN ONE', 'NONE', also known as the arabic numeral 'ZERO', or 'NAUGHT'.


'On a long enough timeline, the survival rate for everyone drops to zero.'

And THEN,...

Like you just said.

GooseShtepping Moron's picture

What are the net capital flows into or out of these hedge funds, and if there is a net draw down where did the money go? Perhaps the lackluster performance of the one helps to explain (or is explained by) the relative outperformance of the other.

Hedge funds presumably being the smart money, it would be interesting to hear what they think about all this. I don't mean what they say to the public, but what they say to each other behind closed doors. If they've bailed out of high growth stocks and repositioned into safety for a good reason, that would tell us that the party really is winding down. They would be the ones to know, after all.

MontgomeryScott's picture

"What are the net capital flows into or out of these hedge funds, and if there is a net draw down where did the money go?"



Show me the 'net capital' in fiats. (WAIT, let me print some moar, O'Barry and Mr Yellen say; and there's a new trick we'll try on you!)


"NET CAPITAL". Now, THERE'S a definition that awaits an explanation!

Is that like the NET that collects the 'CAPITAL' fishies from the SEA of HUMANITY, and then EATS IT in GLUTTONY?

FUCK, I'll bet you learned THAT term in KOLLEGE!

Didn't you? DI'NT YAH?

The 'NET DRAW' for the 'SEASON'? The PROFITS that you get to keep and eat? The FLOW of the TIDE, in to or out of this 'NET', that brings the harvest of sucker-fish to your table?

'S TRUTH, I know, laddie!

SHHH. It's a secretive secret, now.

"If they've bailed out of high growth stocks and repositioned into safety for a good reason, that would tell us that the party really is winding down. They would be the ones to know, after all."

Tell me this: are you working on your next aquisition of the shiny thingie for the wifey; or the new boat?


Yen Cross's picture

  The sun is rising.  OOps I stayed up.

  Be well Bitchez.

ebworthen's picture

ZeroHedgies would be nice.

I can dream, can't I?

Caviar Emptor's picture

Hedge funds are starting to feel sooo 2005. It was a perfect naive casino fantasy: if you have a foolproof "system" you can beat the house at the tables! If you're always "hedged" then you can't lose :) Bernie Madoff capitalized on faith in this naive "system" with his famous split strike conversion play: long puts, short call, long underlying. Can't miss!

Arius's picture

how did Bernie get caught anyway?  must have been some story for sure, otherwise, what the fock everybody is lying anyway ... i remember his wife Ruth was furious, the poor women must have really felt betrayed, she knew what scambacks all these other hedge fund guys were ... she knew the system from inside

Ban KKiller's picture

Well...going out on a limb here...I like UltraCoin. Reggie's. Why? Well I remember vividly having email but no one to email. I remember the 67 web sites, in total. EVERYONE said it was a fad and what did I need with email when they didn't have email? My old Netcom email address is so cool I gave it to the ex as a get the fuck away gift. She still gets questions about it. Building off of the bitcoin protocol seems to be the key, right? 

Hedge Funds? Fortress Investment Group, owner of Nationstar Mortgage, LLC (actually a scumbag collection company), fuck you! What? You are already fucking yourselfs over? Keep it up!

Yen Cross's picture

  It;s nice to "forget" occasionally.

   Junk away.

falak pema's picture

hey ya know that Berlusconi's tax evasion penitence is to take care once a week for the old brigade in Alzheimer chronic "forget".

Ya into chronic forget???

That requires no junk 'cos you might forget it! 

Keep using ya brain its the only way to stay away from chronic "forget" !

Paracelsus's picture

I remember during the Oct. '87 crash these Tokyo traders were tearing their hair out,literally.Never seen that before.The point being they thought the Casino was rigged (it is ) and the US Gov't would step in to stop the rout (the exact opposite of allowing markets to clear).Next up the japanese Gov't propped the failed banks up,essentially bringing twenty Zombie corpses into a studio apartment (what fun).They are still paying for this mistake.

Was it Geithner who decided to Let Lehman go under to enforce discipline (MORAL HAZARD)?

Anyhow lots of blame to go around but the main point is Hedge funds operate outside the rules and any investor must balance the risk.This is the bit about moral hazard.It is called due diligence.

So the Banks take the shadow inventory back on their books to "structure" or layer the investment vehicle.But the market tanks and nobody wants the crappy CDO's,which are now imploding from people walking away from the houses.

We don't want any Gov't regulation.---------> Wait,we are in the sh*t! Throw us a bailout!

Of course the fact that the FED is made up of Wall Street banks has nothing to do with it.

And then everyone rakes in huge salaries and bonuses.Nobody does prison time (Remember Ivan Boesky?).

So now they are about to throw the book at an OWS demonstrater who elbowed a NYPD cop in the eye.

Felony assault on a Peace Officer.Seems someone wants to send a message.....

Spungo's picture

I can't judge hedge fund managers. The current market is fucking retarded. Tesla and Twitter should be slam dunk shorts, but you would go broke if you actually shorted one of them. No earnings? No problem! Trading over 10x sales? No problem. Banks all around the world are printing trillions of dollars, so metals should going to the moon right now. They're not. Someone buying gold could easily be down 10, 20, 30%. Retard politicians are desperately trying to start world war 3, and the VIX is down. The CBO says the US is absolutely bankrupt, but US bonds are still under 3%. 

Arius's picture

"fucking retarded" how about a cheating machine ... the other guy has your bets in the computer before he puts his bets ... yeah, it is more complicated than that, of course it is thats why you get sucked into it, but the principle is always the same and it is the only reason why it exist to transfer wealth, the same concept as the casino, the casino people understand very well the mentality

Aussiekiwi's picture

Tesla and Twitter are freaking incredible, one day everyone will wake up simultaneously and then watch those puppies crash.

I Write Code's picture

And some maroon on cnbc is saying "BUY BONDS NOW BECAUSE RATES ARE GOING DOWN!"

It's amazing how stupid some people can be, but then if it turns out he's RIGHT, ... (even on just a trading basis) ...