How Hedge Funds Are Making Money In 2014: The Full Strategy Breakdown

Tyler Durden's picture

As part of his latest weekly report, Goldman's David Kostin breaks down the full array of strategy "baskets" used by hedge funds at this moment to outperform the market in 2014. In a nutshell, the best performing strats right now involve betting on a high vs low tax rate divergence (perhaps because companies facing high tax regimes are soaring on hopes they will engage in a price-boosting tax inversion deal), and shorting BRIC exposure:

... on betting aggressively against high quality and shorting strong balance sheet names (thanks to the bond bubble which allows the worst of the worst companies to refinance in the current environment) while at the same time betting that companies will engage in aggressive stock buybacks and generate a return to shareholders (via dividends and general total cash):

... and finally, on once again parking into high hedge fund concentration stocks such as Goldman's Hedge Fund VIP basket, and boosting high concentration positions while shorting names out of hedge fund favor, as well as going long the high sharpe ratio names. Finally, and perhaps surprisingly, going long the most shorted names, a strategy that generated the best returns in 2012 and 2013, has been relatively mute so far in 2014.


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X.inf.capt's picture

so, basically we're strong, but the BRIC's are'nt???

sorry, i aint buying it!

just alot of CHART-PORN...


Cattender's picture

i keep buying silver... most likely not too smart of me. LOL.

lordylord's picture

"i keep buying silver... most likely not too smart of me. LOL."

No worries.  In today's society, doing the opposite of the herd is a good indication that you are doing something right.

BrosephStiglitz's picture

Depends on your time horizon, right?  Capital outflows may well hit these countries hard in the short-term if rates rise.  Longer term my guess is they are much stronger.  Time will tell.

Edit: I am inclined to treat anything I read with a grain of salt these days.  Peak bullshit and chest-beating between global powers too.

Cognitive Dissonance's picture

Lot's of dimes in front of steamrollers there.

<Look, another one. Let me just reach over and pick.............>

I Write Code's picture

Hard to read, need a red line at Jan-14 or something.

Nothing looks very good this calendar year.

chunga's picture

Somebody throw David Kostin in the lake of fire.

Ban KKiller's picture

Fortress Investment Group? Fuck you! 

Just a juvenile approach to anger management. Mr. Mudd is doing what, now? Preparing a defense for his crimes at Fannie Mae? If being an idiot is a crime. What a minute! He made millions there so I guess not so dumb. 

Based on the Hobby Lobby decision I don't have to pay income tax as that tax bails out corporations that go against my religious beliefs. Can't wait to go to court on that one. 

Hedge funds are here to earn fees. That is it. 

yogibear's picture

The Vampire squid disinforms again. Doing satans work.

sunkeye's picture

Jesus I've heard of inside baseball but this is ridiculous.

Signed, a broken down e-mini Johnny 1-lot (circa 1999 yeah I know prehistoric man me) who's glad he got out.

DerdyBulls's picture

Ah HA! So this is what productivity looks like. Who knew...

hedgiex's picture

GS can climb into the fasr paced changes in the top performing HF trading strategies ? These HFs are morons that allow you to have more than (unavoidable) glimpses of their holdings that you can clone ? REALLY