Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Most Recent Stories

Hedge Funds Are Getting Their Teeth Kicked In This Year

Most active managers prove their worth when the market declines.  But what about the other, oh, 75% of the time when the market is rising?  The reality is that being an active manager is incredibly difficult in an environment where the market seems to never go down.  If you’re not leveraged, strategically differentiated, lucky or unusually skilled the odds are heavily against an active manager outperforming a market like the one we’ve seen in 2013 where stocks just don’t go down.  But should the discrepancy look THIS bad?

Here are the YTD returns from the basic approaches:

  • The HFRX Global Hedge Fund Index: +3.77%
  • The all equity S&P 500:  +14%
  • A 60/40 stock/bond portfolio: +8.5%.

Bear in mind you’re probably paying 2 & 20 for that 3.77%.  That’s not bad.  That’s awful.*

When I do portfolio reviews with people I always tell them that Wall Street wants to sell them the Ferrari because it sounds fancy, looks slick, drives fast and, oh yeah, it’s expensive.  But that ignores the reality of life.  We don’t need to get from point A to point B driving 100 mph in a flashy car.  We’ve got our kids in the back, bumps along the way and in most instances that means a more prudent approach to preparing our savings portfolio (yes, you’re probably not an investor!).  Most of us think we want a Ferrari, but for 90% of us a Honda Accord is safer, almost as fast and a heckuvalot less expensive.  And if the recent performance of the HFRX is any tell, that Ferrari you own is probably built with a Go Kart engine….

*  HFRX is net of fees.  

Comments are closed.