Hedge Fund Performance

This was published over at Zerohedge yesterday.  Key take away is here:

"For the third year in a row, hedge funds will underperform the market, this time by nearly 50%, having returned 5.15% through the end of November (with just equity funds +5.20% YTD), less than half what the MSCI World has returned. And while one can make the argument (not correctly) that a manager has to beat only a given benchmark, and not the overall market, the reality is that for virtually all LPs, seeing their money return well below the S&P not for one, not two, but for three years running, is about the last thing they need before they make a decision to fax in that redemption form."

This underperformance is why I think it's still possible for the market to catch a bit of a bid between now and Christmas as lagging funds will likely try and chase performance by possibly bidding up equities, especially the more volatile lot.   I also think somebody is going to have to start asking some very hard questions regarding private partnerships like hedge funds.  Investors pay a lot of money for performance that for too long has badly lagged most indices.  I think a combination of size and group think {too many funds chasing the same ideas} has hurt the industry.  Frankly I also think there's a whole cabal of funds that flourished over the years due to access to illegal insider information which has now dried up.  I know if I underperformed the market as much as these funds have over the past three years I'd likely be fired.  May be time for investors to do the same to most of this set.  

Link:  zerohedge.com: Paying 2 and 20 for what?