Hedge funds’ abysmal performance so far in 2013


Hedge funds have had a hard time keeping up with the broad market indexes over the past ten years. Maybe this will be the year the hedgies break the cycle? Via Sam Ro, here’s a Goldman Sachs chart showing hedge funds’ performance so far in 2013 – click to enlarge:

hedge fund performance

Usually when you see figures about average hedge fund performance you don’t get a helpful broad breakdown like this – so you end up wondering how far the average was skewed by outliers. Here you can see that not only did hedge funds as a class underperform the S&P 500 by fully 10% through May 10, but only a small sliver of funds managed to outperform it – and that’s before hedge funds’ hefty fees, typically 2% of assets and 20% of gains. (Zero Hedge published a separate HSBC report from mid-April showing the outlier funds that managed to achieve 40+% gains through that date.)

Now, the Goldman report seems to include all types of hedge fund strategies – including Managed Futures, Market Neutral, etc. – which makes the fixed S&P 500 benchmark a bit unfair in some cases, especially when Goldman defines the ‘Average Mutual Fund’ as just large-cap core equity funds.

The ‘Hedge Fund VIP Basket’ is Goldman’s collection of 50 individual securities that “mattered most” to some of the largest hedge funds – that is, they were broadly held as top 10 positions in individual funds. Looks like they should have stayed more concentrated in those positions.

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Mick Weinstein
Mick Weinstein
Mick is the Head of Editorial for Covestor, a financial journalist and online content specialist. Prior to joining Covestor, Mick was for five years the Editor in Chief and VP Content at stock market analysis website Seeking Alpha, where he built the editorial function as the site attracted over 3.5 million unique monthly visitors and developed an innovative platform for intelligent stock market discussion.

Mick is a graduate of the University of Michigan, Ann Arbor.