New York (HedgeCo.net) – In an article on Bloomberg yesterday, author Sheelah Kolhatkar asked “Are Hedge Funds Still for Suckers?” The article cited the performance over the last few months mainly and it looked at the performance of well-known funds managed by high profile managers more so than the industry as a whole.
Yes August was a rough month for the likes of David Einhorn, Daniel Loeb and Ray Dalio. We have even featured stories on their recent performance and how these guys struggled. However, the industry as a whole fared much better than the overall market as the HFRX Global Hedge Fund Index put the average hedge fund performance for August at -2.2% compared to the 6.26% loss for the S&P. To give credit, the Bloomberg article does point this out.
However, have we really become such a short-sighted investing community that we question investing strategies based on one month’s results? The article goes on to point out how the hedge fund index failed to beat the S&P in 2012, 2013 and 2014. Okay, so now we are looking at three really strong years for stocks so obviously a hedged portfolio is going to underperform. But what about before 2012? What about so far this century?
Just yesterday we featured an article about what the Credit Suisse Hedge Fund Index has done over the last 15 years. If you missed it, here is an excerpt:
From January 1, 2000 through July 31, 2015, the Credit Suisse Hedge Fund Index gained 158.7% compared to a gain of 89.77% for the SPY over the same time period. If we look at the first decade of this century, from January 1, 2000 through December 31, 2009, the Credit Suisse Hedge Fund Index 88.97% while the S&P lost 9.63%.
We are not saying that hedge funds should make up your entire portfolio. What we are trying to get across is that alternative investment strategies should be a part of your overall investment portfolio. Alternative investments should be considered an asset class just like stocks, bonds, real estate and commodities. Just last week we featured an article entitled Modern Portfolio Theory Needs to be Modernized. In that article we laid out how various portfolios would have performed so far in the third quarter as well as the YTD numbers. The portfolios that featured our alternative strategies along with stocks and bonds outperformed in both time frames.
With all due respect to Bloomberg, we don’t think hedge funds are for suckers at all. And when the next bearish phase hits the market, if it hasn’t already started, let’s see how hedge funds as a whole fare against the S&P.
Rick Pendergraft
Research Analyst
HedgeCoVest
