Hedge funds
The CS/Tremont Hedge Fund index is always worth a read. Take a look at this analysis of the performance of Global Macro Funds.
Basically whatever chart you look at you will find that from about the end of 2002 Hedge funds have underperformed non-geared investments in SP500 or the DJ Word Index, in dollar terms.
I think David Brief is onto something in his letter to the FT today:
From Mr David Brief.
Sir, I am constantly impressed by the range of excuses for poor performance from those masters of alpha generation, the hedge fund managers ("Wadhwani closes Keynes fund", February 1).
Over the past couple of years, dull returns have been blamed on lack of volatility, as in the Wadhwani case, and unexpected volatility, as in May last year or October 2005.
The PR for hedge funds usually claims that they will generate performance in all market conditions, unlike poor old-fashioned long-only managers. The truth appears to
be that in general they do well in market conditions where trends can be leveraged and don't when they can't.
Of course, there are some investors who do not conform to this stereotype, but it seems a more accurate picture than the one the hedge fund groupies wish to paint.
David Brief,
Chief Investment Officer,
BAE Systems Pension Funds Investment Management,
London SW1H 0QT