July was not a bad month for most hedge funds. There is, however, one big problem: virtually all of them underperformed the S&P. As they did in June. As they did in May. Etc. Etc. And that has been the theme this whole year: hedge funds, which account for over $2 trillion in unlevered purchasing power, and between $4-6 trillion levered, are not doing badly, they are simply underperforming the S&P very badly, in many cases by more than 2 standard deviations. And as all those fund managers who wake up and go to bed with two words on their minds: "career risk", underperforming the benchmark, or in this case the broad stock market, which does not demand 2 and 20, is the surest way to extinction. Then again, in a centrally planned market in which a hedge fund called Tulip Trend is the best performer Year To Date (and in which Paulson's Disadvantage Minus continues to be the worst), nothing can really surprise any more.
Top and bottom 20 Hedge Funds Year To Date:
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Select brand name funds July performance:
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Full HSBC report: