Here are the performance numbers for 2021: https://twitter.com/AnalystEgg/status/1476601845871173633?s=20. Two Sigma, Rentech, Citadel, Voleon, Point72, Bridgewater ... all seem to be significantly underperforming naive indices. What a waste of money on quants?
This is even before fees. Usually 2/20 I assume. Some have loads? So the actual performance for investor is even lower.
A 20% return on 100 billion portfolio is no joke . Don’t compare those with your 30% return on 500k portfolio. These guys need to risk adjust not like retailers like you who gamble with naked calls / puts
Those *Hedge* Funds have a goal different than beating 'naive' indexes.
Something something risk adjusted returns, they're not trying to randomly beat SPY every year 😂
But even so, they should outperform the benchmark on a longer timeframe. Which might or might not be the case.
Try comparing when the S&P return is -20%
So they are useful one in every 20 years?
Is insurance only useful one in every 20 years?
Yeah it makes sense that risk adjusted return might worth the fee or for the purpose of wealth preserve purposes. And indeed trading at 100 billion dollars size is different. But gotta see their deltas, and how they perform long term against drastic downside (e.g. Covid). Last I recall even bridge water didn't do super well even. So for average Joe who don't have 100mi+ just simple index in long term is good enough. Trading size can be beneficial towards small fishes.
Protection against Covid downside? Have you seen the data? They were down at least similar amount. Not only for average Joe, but even for sovereignty funds, what validates using hedge funds if they yield crap performance?
Yeah that's my point. I don't know what the reason is, maybe I'm too poor to fathom. But personally I feel hedge fund is exceptionally good at marketing and sales. Thinking about GS, BS, LB and other IBs, sales people... synthetic CDO lol I have seen many hedge fund managers openly bash indexing and claim doomsday. I personally just believe in Jake Bogle...
Hedge funds have been underperforming because the stock market has been setting record after record each week. They only become an attractive place to invest when the market is either flat or negative.
You’re comparing some of the best performance of all time for basic indexes to these hedge funds. Hedge funds aren’t designed to just deliver the greatest possible returns; they’re supposed to deliver reasonable returns in most (or even all) market conditions. They might be managing large pension funds, for instance; you really don’t want pensions wiped out just because the S&P drops.
https://youtu.be/DZ2QZg_1pHQ a answer to your question
PIP them?