And The Worst Performing Strategy In 2014 Is...

Tyler Durden's picture

Hedge fund performance continues to be weak so far in 2014 and this week was no different as long/short funds found to their dismay that trading on rational thought and fundamental analysis was for losers. However, global macro strategies are doing the worst of all as carry trades unwind, sanctions create inflows, and geopolitical chaos creates nonsense from sense. The best performing hedge fund strategy... buying-the-most-shorted is beaten only by Bonds.. and in first place of all assets - Gold.



As Goldman explains...

Our Hedge Fund VIP basket of most popular hedge fund long positions has returned just +1.4% YTD vs. +2.4% for the S&P 500. At the same time, our basket of Very Important Short Positions (GSTHVISP) has returned +4.2% YTD.

The long VIP/short VISP pair, a proxy for equity hedge fund performance, has a net return of -2.8%, in line with the -2% YTD return of the HFR Equity Long/Short Hedge Fund Index.

Global macro funds have posted a similarly weak -2% YTD return, while the HFR Hedge Fund Composite index has returned 0%, supported by the +2% YTD return of event-driven hedge funds.


Fund performance suffered during the March-April drawdown in popular momentum and high-growth stocks. The Hedge Fund VIP basket experienced a sharp 5% pullback relative to the S&P 500 in late March, suffering its worst 21-day return outside of the crisis periods of 2002, 2008, and 2011.

Performance headwinds from stock-picking were compounded by poor market timing. The majority of the most popular positions have actually performed well YTD. The basket’s internet and media stocks returned -4% YTD, while the balance of the constituents rose 6%, outpacing the S&P 500 by nearly 400 bp. However, hedge funds cut net exposure in early April, just before the S&P 500 and most popular positions began to rebound.

Funds were remarkably quick to act during the momentum drawdown. The most recent 13-F filings show holdings as of March 31, just two weeks after the drawdown began, but reflect significant changes in portfolio composition compared with the prior quarter: Position turnover, which had fallen for three consecutive quarters to record low levels, rose modestly; the average fund reduced its long holdings in the Info Tech sector, moving underweight relative to the Russell 3000; and funds increased ETF shorts while lowering ETF longs to the smallest portfolio weight since 2007

Poor hedge fund performance is generally unsurprising given the obstacle of historically low return dispersion. Hedge funds consistently allocate the largest share of their assets to the Consumer Discretionary sector, where the large dispersion of stock returns typically provides alpha opportunity for stock-pickers, and as of March 31 nearly one in four dollars was put to work in the sector.

Recently, however, return dispersion has fallen to historic lows for the S&P 500 in aggregate (1st percentile vs. its 30-year history) and especially for the Consumer Discretionary sector. In addition, after outperforming the S&P 500 by an average of 11 percentage points in each of the past five years, Consumer Discretionary is currently the worst-performing S&P 500 sector YTD. Conversely, the best-performing sector in 2014, and one of the only two sectors with above-average return dispersion, is Utilities, where funds have a 0% net weighting.

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Tao 4 the Show's picture

ZH is so wrong. This was a great strategy for the Hedge Fund guys! How many percentage points did they lift from their rich little muppets?

Emergency Ward's picture

"We are fee based Masters of the Universe Financial Advisers and experienced hedgers and only charge a fee, just a 3% fee for $10 million-dollar-minimum accounts.....past performance is no guarantee......blah blah blaggggg"

knukles's picture

Now, lemme see here...
The Macro guys, long/shorts and event driven can all go long bonds and gold, and short anything else.
So what's that tell us?
That they're a whole buncha fucking ex-bond and stock peddlers trying to masquerade as investment managers in order to not give a rats ass about OPM, but just collect outlandish fees, for being fucking sophists.


Remington IV's picture

They're out shopping for new Hamptons mansions , and can't be bothered with making $$$ for thir clients

_ConanTheLibertarian_'s picture

Yeah, but some of my silver (ok not gold) stocks are down 80% in 5 years time. High time for the mania phase.

samcontrol's picture

lucky you, some of my silver investments are also down 80% , but in two years...

DoChenRollingBearing's picture

Fishez!  Gold being number one is nice to see for a change.

Gold will win, but it sure has taken a long time, and it could very well take a looooonnnnngggg time, as the manipulators and the "paper gold players" seem to have a lot of market power.

Physical, in the end, will win when the world economy turns to crap.

FOFOA says the reset will likely occur when the sellers don't sell anymore.

joego1's picture

Just more time for us to stack my friend.

Winston Churchill's picture

Only one seller left that counts.
Will the FedRes sell every last ounce of phyz, to support the paper Ponzi, is the question ?
IMO the answer is no.
Lots of fireworks this July,and I don't mean the fourth.

X_mloclaM's picture

what of the opinion of Another, quickly lost, drown, and thus soiled by friends

DoChenRollingBearing's picture

Another, his Friend and FOFOA were/are geniuses.  I meant no disrespect to the immensely gifted Another.  It just looks like the whole process is going to drag out longer than almost everyone has foreseen.

That is why I just guess now, not predict.

Tulpa's picture

Ric Edelman was on his radio show saying that people staying out of the stock market because of the poor performance this year are falling prey to the logical fallacy of "recentism".

Of course last year at this time he was saying OH MY GOD THE S&P'S UP 20% FOR THE YEAR, LOOK AT HOW MUCH MONEY YOU'RE LOSING BY NOT BUYING STOCKS!!!!!!!

NoDebt's picture

Don't trust anyone who spells their name Ric.

toady's picture

I usually don't make calls, but cash out now and get that farm land. (If you haven't already! )

Seasmoke's picture

If Gold is the best YTD. I must be a greedy pig. Because I have been very frustrated by the price. 

Kirk2NCC1701's picture

Ever heard of the saying "Figures lie, and liars do a lot of figuring"?

jonytk's picture

Best YTD is bitcoin and namecoin, don't be fooled. 400% rise. getbitcoins

CHX's picture

How barbarous...

Ban KKiller's picture

Wall Street is for suckers...all ivy league inbreds. Off yourselves!

Hongcha's picture

Bought more .999 silver Buffaloes on Friday from apmex.  I paid $.50 more apiece than in early January.  I continue to believe the day will come when rich Asians will fly over here to buy our PMs like they do our Chinese antiques.  Learn a little Mandarin and get ready to work with the New Mongols; because your govt. has sold you out and will try to whinge every penny of what you own from you as the empyre spirals down the bowl.

Like a Roman citizen of old, I have thrown down with the barbarians.

Kirk2NCC1701's picture

When Fraud is common place, the prime objective of investment is not ROI (as Wall St and its army of minions and familiars would have you believe), but "Preservation of Wealth".

Only time-proven real assets preserve wealth.  And their physical possession/control under even dire circumstances is a must, because under these conditions, "Possession is ten tenths of the law".

cobra1650's picture

Are these figure YTD through April or Mid-May?

Flux's picture

Well, gold did well for the first 2 months. That's about it. Then it dropped and has floundered since then. Canadian real estate has exceeded gold's return YTD. Of course, Zero Hedge has warned you against that trade.

I am always surprised how consistently Zero Hedge gets things wrong.

In fact. the Canadian market has handily whumped gold. A nice 50-50 stocks/long bonds in the Canadian market hast returned a nice, smooth 9% YTD.

Still waiting for Armageddon.




Tulpa's picture

Did you predict this in advance or are you just cherry-picking an asset class after the fact?

Anyway, you don't make or lose any money on gold until you sell.  If you think gold is going to remain in the $1300 range long-term I'll gladly take that bet.

IPA's picture

Amen, it is like people who fully accept inflation and love how their house goes up in "value", but don't understand why food prices and gas prices keep rising. 

Spungo's picture

If you want to make a killing, find a list of which companies were the largest contributors (not donors) to a president's campaign and buy those companies as soon as that president is elected. 

Luckhasit's picture

I thought I'd never see the day.  Who am I kidding yes I did. 

It's coming.