Loeb Warns of Hedge Fund “Washout”

Dan Loeb, founder Third Point, draws two conclusions about the hedge fund industry and the markets in his recent shareholder letter, according to this recent Bloomberg piece. The first is Loeb believes the hedge fund industry is in the early stages of what he calls a “washout” after the group’s poor returns over the last few years. Loeb says the recent run for many funds is one of the most “catastrophic periods” he has ever… Read More

Hedge Fund Cloning Strategy Shows Massive Outperformance

In his MarketWatch column, Mark Hulbert discusses an investment strategy based on imitating hedge funds, which was developed by Mebane Farber of Cambria Investment Management. Faber argues that “we can duplicate [the best hedge fund’s] investment performance without having to pay a penny in management fees” by reviewing their holdings (which are publically available with a maximum of a 45-day lag) and imitating carefully. Specifically, “the key is to construct a portfolio of the stocks… Read More

An Ecosystem of Experts Who Advise Top Hedge Funds

Ari Bergman acts as a consultant to pensions, endowments, and hedge funds, often through under-the-radar arrangements. As the Wall Street Journal describes it, Bergmann “is part of a larger ecosystem of consultants who sell their investment beliefs to hedge funds. The funds, hungry for returns or cheap hedges for their portfolios, get fresh ideas that comprise or inform their wagers.” Consultants receive a share of gains resulting from their ideas, as Bergmann does, or charge… Read More

Study: Smaller Hedge Funds Beat Largest Funds by Wide Margin

  Nick Motson and a colleague from City University London recently concluded that small hedge funds outperformed large hedge funds on average over the 20-year period 1995-2014.  The smallest hedge funds, based on assets under management, returned 0.75% per month or 9% annually, compared to 0.61% or 7.32% annually for the largest funds. Given that 90% of the assets managed by hedge funds are with firms managing over $1 billion, while firms with under $100… Read More

The Largest Buyer of U.S. Treasurys Might Surprise You

According to a report in the WSJ, the largest buyer of U.S. Treasurys has been a “little-known New York hedge fund run by a former Yale University math whiz“. Element Capital Management, run by Jeffrey Talpins, has been the biggest purchaser of U.S. Treasury debt over the past 10 months. The firm, which looks to “exploit small inefficiencies in the world’s most liquid securities”, has raised some questions because its cumulative purchases of Treasurys looks… Read More

Shorting Now Too Risky for Some Top Hedge Fund Managers

Some big-name hedge fund managers who made out shorting stocks last year now see major short positions as too risky, and are tilting their portfolios mostly — or completely — to the long side, Reuters reports. “Some hedge funds have already changed tactics and are simply buying cheap stocks, wary of getting burned if a stock they are shorting announces unexpectedly good earnings and the share price spikes — a real possibility in an improving… Read More