Salient to Investors:
Hedge funds continue to be an overpriced, middling asset class.
Goldman Sachs found that hedge funds returned an average of 5 percent in 2013 versus a 15 percent gain in the S&P 500, while only 5 percent of the funds beat the S&P and more than 1 in 8 posted a loss. Goldman said hedge funds betting on stocks to rise have done well, but incorrect short positions cut into returns. Goldman found that 31 of the 50 ‘very important short positions’ for hedge funds beat the S&P while only 4 lost value, as the hedge funds hoped.
Hedge funds have underperformed the S&P since the financial crisis, yet Hedge Fund Research says funds saw inflows in 14 of the last 15 quarters.
eVestment says hedge fund net inflows have slowed to $5.8 billion through the first four months of 2013, the slowest rate of growth to start a year going back to Q3 2003, while $10.5 billion has exited equity hedge funds in 2013 versus inflows of $31 billion into fixed-income and credit strategies.
Jason Rosiak at Pacific Asset Mgmt said there is a continuous brain drain on Wall Street, and hedge funds are playing in asset classes for the first time.
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