Investors Keep Returning to Hedge Funds

A survey of institutional investors by JPMorgan Chase found that most participants planned to “maintain or increase their overall hedge fund allocations in 2019, following a year during which 68 percent of respondents said their hedge fund portfolios underperformed.” This according to a recent article in Institutional Investor. Over half of the survey’s 227 participants—which included banks, consultants, endowments, foundations, family office, funds of funds, insurers and pensions—said they intend to maintain their hedge fund… Read More

Top Stockpicker Steps Off Hedge Fund Stage

An article in Barron’s reports that Steve Mandel–“the most successful fundamental stock picker of them all”—stepped down as portfolio manager of Lone Pine Capital in January. The article notes that Mandel, who was not well-known outside of the hedge fund industry, generated “tens of billions of dollars in gains for his clients over the past two decades and established one of the best investment track records ever.” The article includes praise from Mandel’s peers, including… Read More

A Hedge Fund Performs by Staying Small

Managers of the Netherlands-based Plethora Precious Metals Fund say that the “key to getting monster-sized returns in mining equities is to be small,” according to an article in Bloomberg. Compared to fund giants like BlackRock and Vanguard, Plethora’s $20 million in assets is small, but the fund isn’t looking to get bigger. The article reports that the fund invests in young mining exploration companies, mostly in gold. Its founder, Peter Vermeulen, said in an interview,… Read More

The Death of the Hedge Fund Industry Has Been Greatly Exaggerated

An article in Bloomberg reports that, despite the closure of some bigger name hedge funds, the overall number of liquidations fell in 2018. What may have seemed like an omen for the industry, the article says, is more of a “Darwinian thinning of the herd” that may suggest an improvement in quality. “As the industry has matured and the regulatory environment has become more vigilant, the cost of setting up shop has risen,” the article reports.… Read More

WorldQuant’s New Fund Underperformed

The first quant fund established for outside investors by the Connecticut-based firm WorldQuant has lagged its benchmark from the outset, according to an article in Bloomberg. The quant stock fund was created as a joint venture between WorldQuant (founded by Igor Tulchinsky) and Millennium Management (founded by Izzy Englander). According to the article, the fund was established to beat the MSCI World Index by 300 to 600 basis points annually but lost 9.5 percent in… Read More

D.E. Shaw’s Humans are Losing Money

A group of traders at the firm D.E. Shaw, one of the most successful quantitative investment funds, has “struggled to make money in 2018,” according to an article in The Wall Street Journal. According to a spokesman for the firm, its long-short equities group has produced annualized returns of 40% (exclusive of client fees) since January 2013, but the article reports that as of mid-October of this year the group’s losses reached about $100 million.… Read More

The Hedge Fund Strategy That Isn’t Working

Although tracking trends in financial markets was once a profitable investment strategy, the approach has fallen on hard times due to crowding. This according to an article in The Wall Street Journal. Trend-following is explained as follows: “If a security is going up—usually measured by a short-term moving average rising about a long-term moving average—then it’s time to buy. If it falls below, it’s time to sell.” During the 1990s and 2000s, the article reports, these… Read More

Volatility Presents Hidden Risk to Hedge Fund Returns

According to recent research from Robeco Asset Management’s David Blitz: “hedge funds have hitched their wagon to stocks with large equity-price swings—a misguided strategy over the long haul.” These findings were reported in a recent Bloomberg article. In an interview, Blitz said, “The fact that hedge funds are positioned like investors in high-volatility stocks, this does not contribute positively to their returns.” Blitz says that moving away from a low-volatility factor represents one of the… Read More

These Hedge Funds Don’t Want You

Some of the world’s best hedge funds are available only to employees, early clients and a “few lucky others, part of an effort to limit their size and keep them  nimble enough to continue racking up gains,” according to an article in The Wall Street Journal. This leaves investors with two options, the article explains: they can either invest in the hundreds of less attractive hedge funds or they can put their money in other,… Read More

Be Cautious of Mutual Funds Run by Hedge-Fund Managers

A recent study has found that “mutual fund managers who also run hedge funds significantly underperform their mutual fund peers,” according to an article in Barron’s. The article cites comments by University of Oregon finance professor Diane Del Guercio, who analyzed the performance of approximately 600 funds at the top 30 fund families and found that, from 2005 to 2011, “mutual funds managed side-by-side by hedge funds underperformed peer funds by 0.8 to 2.2 percentage… Read More