Average Hedge Fund Did Worse Last Year Than The S&P

Anyone can run a hedge fund. Just take all of your client's money, stick it into the SPY and IWM and then take a 1 year vacation in Europe. If it goes up 10% and you have 1 billion under management, you make 20 million in management fees and 20 million in incentive fees for a total of 40 million. Even if it goes down a little, you still make close to 20 million just in management fees. You can even write covered calls to rake in some extra premium.

Now the big question is who is going to give me $1 billion to play around with?

 

Schindler Trading Performance (http://www.schindlertrading.com/index.php?page=performance)

Outperforms S&P and low correlation with S&P - exactly what you want from a hedge fund:

Return Since Inception 299.6%
Annualized Return 27.7%
Correlation with S&P 500 Index 4.9%

 

Hey makloda, take it easy. You might get a heart-attack. Don´t want to be responsible for your unease. Here´s a an advice from my doc :
take a deep breath and begin counting 22, 23, 24 and so on...relax...

 

Hows 0 beta and 7-9% after fee sound?

 

Great - where do I sign up?

 

wow....thanks for the comment and the picture.....yes hedge funds may only match or slight lag the S&P.......but the lower volitility is remarkable and apparently worth it for many institutional investors.......remember when the S&P went down over 50% in the last bear market......hedge fund performance barely budged.....that's remarkable.

 

Three points - First, manager selection is everything in the world of hedge funds. The dispersion between the best and the worst can be quite dramatic - much more so than a traditional long-only manager.

Second, over the last fiver years through April 30, the HFR Fund of Funds index returned 8.1% with a standard deviation of +/- 3.9%. The S&P returned 8.5% with a standard of +/- 13.1%. you can see that the Sharpe Ratio is much,much higher for hedge funds than for traditional long only managers. That's why people pay 2 and 20 for their services.

Final point, which was stated earlier, hedge funds are a risk reducer, not a return enhancer. If you feel the markets are poised to go higher, invest in private equity, not hedge funds.

 

What about the hedge funds that blow up? I don't see that as a risk reducer.

 

What about Enrons and Worldcoms blowing up? What about Russian bonds blowing up in 1998?

Defaults happen everywhere that's why one should diversify HF investments.