It's not all Aston Martins and Brioni suits for hedge fund managers this year. As Bloomberg reports [6], "It’s a confluence of tricky markets, super-cautious investors and a tough fundraising environment that’s making it a difficult time for hedge-fund managers." The latest addition to the 775 funds that were shuttered last year (the most since 2009) sees California-dreamer Paul Sinclair liquidating his $458mm health-care equity fund as "political decisions made on the other side of the globe have undermined his stock picks and spurred losses for a second year." Physically and mentally exhausted from his travails (planning to spend the summer sleeping and relaxing), Sinclair joins the wannabe likes of Zoe Cruz and three ex-Moore Capital managers, as he honestly notes "I don’t have an edge on Greek elections, the Spanish banking system, what the European Central Bank, the International Monetary Fund, the Chinese government, Angela Merkel, or the U.S. Federal Reserve will do." It seems an increasing number of masters-of-the-universe are awakening to what retail seemed to figure out over the past few years - that everyone's a hero in a central-bank-liquidity-driven rally - and as one other hedge fund manager noted in his investor letter "Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects, we have not weathered the ensuing volatility well." Once again correlations are rising - 30-day correlation coefficient between the MSCI World Index and its members is 0.92, compared with the average since 1995 of 0.73 - as all that over-priced alpha is shown up as 'central-bank' beta.
[1]- European Central Bank [2]
- Federal Reserve [3]
- International Monetary Fund [4]
- Volatility [5]
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