The more stocks rise, the further behind hedge funds fall—with the
industry now lagging market returns by double-digit percentage points.
Though hedges actually have attracted more investor cash this year, the bulk has gone to bond funds and away from equities, even though the Standard & Poor's 500 [.SPX 1444.49 --- UNCH
] is up a robust 14 percent so far in 2012.
Though hedges actually have attracted more investor cash this year, the bulk has gone to bond funds and away from equities, even though the Standard & Poor's 500 [.SPX 1444.49 --- UNCH
] is up a robust 14 percent so far in 2012.
As
a result, hedge funds have returned just 3 percent year to date, though
assets under management have swelled to $2.56 trillion, according to
eVestment, a data firm that tracks the industry.
The change in fortune for hedge funds, which had trounced stock performance over the past two decades, has market insiders searching for answers.
"Could
the underperformance be cyclical or is there a structural change that
has changed the return structure of returns for the hedge fund
industry?" Mary Ann Bartels, technical analyst at Bank of America
Merrill Lynch, wondered in a report Monday. "We continue to conclude as
in prior research, there (are) likely too many hedge funds chasing (too)
few returns."
There are about 8,300 active hedge funds, and while the financial crisis wiped took a large toll new funds continue to crop up.
BofA
research shows that convertible arbitrage (simultaneously buying
convertible shares and shorting common stock) and event-driven
(headline-following) strategies fared best in September, with respective
returns of 5.6 and 5 percent. Market neutral lagged, losing 5.31
percent.
For the year, this is the third-worst performance to date since BofA began tracking hedges in 1994.
Read more: http://www.cnbc.com/id/49243051
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