As we reported last week [6], one of the most notable features of October was not so much the relentless intervention by central banks to prop up the global capital markets Ponzi scheme and send the S&P to fresh record highs - that much should have been apparent years ago - but rather that just as hedge funds were preparing to aggressively capitalize on the first notable downturn in the "market" in years, the carpet was yanked from under everyone's legs, and hedge funds (which by definition "hedge", i.e., put on offsetting, short positions to plain vanilla longs, something for which they are compensated orders of magnitude higher than mutual funds) were slaughtered once again, following the biggest, or as we called it most Historic [6], short squeeze in 3 years.
Over the weekend, BofA's Ankur Singh picks up on this when he said that "Russell short covering continues.... "
[7]
More: "Large speculators decreased Russell 2000 net shorts to -$5.4bn from -$6.1bn notional."
And the abovementioned punking: "Diversified hedge fund index was down 1.7% for MTD till Oct 29, while S&P500 was up 0.5% on a price returns basis. Equity market neutral funds were up 0.8% while Event Driven funds were down 5.2%." Or basically what we have been saying since 2010: when the global central banking cartel is the Chief Risk Officer of what was once known as the market, there is no point in paying anyone 2 and 20 for hedging risk, since there is no longer any risk. And if and when the Fed et al finally lose control, there is nothing that will hedge the subsequent systemic devastation.
The summary breakdown:
And the granular summary of the marquee names: virtually everyone is once again underperforming the S&P, not only for October...
[8]
... but for 2014.
[9]
This will be the 6th year in a row, when courtesy of central planning, the average hedge fund has barely generated any alpha, and certainly underperformed the S&P 500.
Expect many more Calpers-es to pull out their cash of the hedge fund industry, in turn leading to even more systemic leverage within the shadow banking sector.