Hedge Funds Trail Stocks by the Widest Margin Since 2005
By Saijel Kishan & Kelly Bit - Dec 6, 2013 12:00 AM ET
The $2.5 trillion hedge-fund industry, whose money managers are among the finance world’s highest paid, is headed for its worst annual performance relative to U.S. stocks since at least 2005.
The funds returned 7.1 percent in 2013 through November, according to data compiled by Bloomberg. That’s 22 percentage points less than the 29.1 percent return of the Standard & Poor’s 500 Index, with reinvested dividends, as markets rallied to records.
“It has been difficult for hedge funds on the short side,” said Nick Markola, head of research at Fieldpoint Private, a $3.5 billion Greenwich, Connecticut-based private bank and wealth-advisory firm. “Funds were defensively positioned. Central bank action did bode well for equities and made for a more challenging environment for hedge funds.”
Hedge funds, which stand to earn about $50 billion in management fees this year based on industrywide assets, are underperforming the benchmark U.S. index for the fifth year in a row as the Federal Reserve’s economic stimulus program pushes equity markets higher. Billionaire Stan Druckenmiller, who produced annual returns averaging 30 percent for more than two decades, last month called the industry’s results a “tragedy” and questioned why investors pay hedge-fund fees for annual gains closer to 8 percent.
“We were expected to make 20 percent a year in any market,” Druckenmiller, 60, said in a Bloomberg Television interview on Nov. 22, referring to veteran managers such as Michael Steinhardt, Julian Robertson, Paul Tudor Jones and George Soros. “If the market went down more than 20 percent, we were expected to make more.”
more:
http://www.bloomberg.com/news/2013-12-06/hedge-funds-trail-stocks-by-the-widest-margin-since-2005.html
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