Goldman Sachs places out some fairly attention-grabbing data on hedge funds. Of their most up-to-date report printed in February, they analyzed 788 completely different hedge funds which account for $2.6 trillion of gross fairness positions. That may be a fancy manner of claiming these hedge funds handle $1.7 trillion and $873 billion of brief positions.
Utilizing one thing referred to as 13F filings, Goldman breaks down their observations and offers some perception into what is going on.
First, let’s check out hedge fund and S&P 500 efficiency. Whereas the S&P 500 has logged the worst begin to any calendar 12 months since 2009 (down 9%), the basket of the preferred hedge fund positions held (as tracked by Goldman by these 13F filings) is down 12%.
Wanting again on the trailing 12 months, The S&P 500 has a constructive 14% return whereas their basket of hedge funds is down 7%. That may be a 21 share level distinction in efficiency.
That can be recognized round finance folks as one thing we name, “huge”. Chart beneath.
I’m not a fan of hedge funds…and I’m even much less of a fan of the followers of hedge funds.
Right here’s one motive:
The highest 5 shares held by these hedge funds are – MSFT, AMZN, GOOGL, FB, and AAPL.
The highest 5 shares of the S&P 500, by descending share weighting, are AAPL, MSFT, AMZN, TSLA, GOOGL.
So typically, the hedge fund buyers pay 2% a 12 months in administration charges, 20% of any income above some excessive water mark (for instance, any income above the primary 8% of positive factors), and have very, very restricted liquidity.
And also you get adverse 21 share factors of UNDER PERFORMANCE…However hey, it’s not possible to connect a value to slinging round that you’re invested in a hedge fund at a cocktail celebration.
Somebody: “Oh, you do wealth administration…I’m an investor in a hedge fund that’s tremendous unique and specilizes in…”
Me: “Oh, look! There’s my Aunt Jenny’s cat groomer from again after I was in third grade. I’m gonna go say hello. Excuse me, I’ll be proper again.”
By the way in which, I all the time disliked Aunt Jenny’s cat groomer… She smelled humorous…however hey.
For many who say, “Yeah, however what about that a part of the chart the place the outperformance was up 47 share factors (pp)???” Ahh, sure, good remark.
It’s the tumble from +47pp to -21pp that has me shaking my head. I imply, be higher than a 77pp swing from +47pp to -21pp…particularly for these ridiculous charges.
I’ll log out with this opinion: Nobody wants these BS hedge funds until you might be so boring that you simply assume you want that form of weight to be attention-grabbing at a celebration.
In that case, you’ll discover me with Aunt Jenny’s cat groomer.
Be sure you try our most up-to-date episode of Off The Wall Podcast the place Jessica and I interview Michelle Diamond and Heather Savage with Cumberland Belief, and be taught extra about why folks ought to take into account naming a company trustee after they set up their household trusts – actually attention-grabbing information that I by no means knew earlier than the interview. Test it out.
Maintain trying ahead.