Goldman Sachs places out some fairly fascinating data on hedge funds. Of their most up-to-date report revealed in February, they analyzed 788 completely different hedge funds which account for $2.6 trillion of gross fairness positions. That may be a fancy method of claiming these hedge funds handle $1.7 trillion and $873 billion of quick positions.
Utilizing one thing known as 13F filings, Goldman breaks down their observations and provides some perception into what is occurring.
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 most well-liked hedge fund positions held (as tracked by Goldman via these 13F filings) is down 12%.
Trying again on the trailing 12 months, The S&P 500 has a optimistic 14% return whereas their basket of hedge funds is down 7%. That may be a 21 proportion level distinction in efficiency.
That can also be recognized round finance individuals 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 cause:
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 proportion weighting, are AAPL, MSFT, AMZN, TSLA, GOOGL.
So typically, the hedge fund buyers pay 2% a 12 months in administration charges, 20% of any earnings above some excessive water mark (for instance, any earnings above the primary 8% of features), and have very, very restricted liquidity.
And also you get damaging 21 proportion factors of UNDER PERFORMANCE…However hey, it’s inconceivable 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 once I was in third grade. I’m gonna go say hello. Excuse me, I’ll be proper again.”
By the best way, I all the time disliked Aunt Jenny’s cat groomer… She smelled humorous…however hey.
For individuals who say, “Yeah, however what about that a part of the chart the place the outperformance was up 47 proportion factors (pp)???” Ahh, sure, good commentary.
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 off with this opinion: Nobody wants these BS hedge funds until you might be so boring that you just suppose you want that kind of weight to be fascinating at a celebration.
In that case, you’ll discover me with Aunt Jenny’s cat groomer.
Make 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 individuals ought to take into account naming a company trustee once they set up their household trusts – actually fascinating data that I by no means knew earlier than the interview. Test it out.
Hold trying ahead.