Today, Bloomberg took hedge funds to task [7]with a rather graphic cover, suggesting the hedge fund community doesn't actually provide value. We disagree: hedge funds certainly can provide value (especially those who are too big to fail, syphon inside information, and whose army of lawyers makes them untouchable to government prosecution) if only to their LPs and other investors, however not in an environment where none other than the central bank's task is to manage risk. Which explains why for the fifth year in a row, or roughly since when Bernanke became the world's biggest and most important portfolio manager, hedge funds have underperformed [8]the S&P.
And with the Fed's "performance" now inextricably linked to that of the S&P (i.e., a market crash simply cannot be allowed without a concurrent collapse of faith in the Fed and thus the reserve currency and from there, the fiat system) hedge funds, whose job is to do what the Fed now does, i.e., hedge downside risk, will have an increasingly more difficult.
The latest, June, HSBC hedge fund performance data merely confirms what we have shown on a monthly basis: the vast majority of hedge funds continue to underperform the S&P. The sorted table below shows that of the 32 or so marquee HF names, only 4 are outperforming the S&P YTD while 28 are doing worse.
[9]
The HSBC tracked top and bottom 20:
[10]
And the full report: