Category Archives: hedge funds

5/5/16: Macro Hedge Funds: Neither a Hedge, Nor a Fund…


Having written recently about the trials of Hedge Funds sub-sector (see http://trueeconomics.blogspot.com/2016/05/4516-talent-is-problem-but-so-is.html), it's worth posting this neat chart from Investcorp showing 12-mo rolling median return to macro strategy HFs:

Yeah, it is ugly. And it has been ugly since around 2012, and structurally non-pretty since the end of the Global Financial Crisis.

But the really, really ugly thing is that the chart above shows that macro hedge funds are now (over post-GFC period) pro-cyclical (or at least not countercyclical), in other words, they hedge nothing macro on the macro downside risks and do not perform well on macro upside. It is as if someone on purpose decided to create a strategy that underperforms the market on positive trends and fails to hedge the market on downside trend.

Any wonder everyone is running out of the hedgies barn?..

7/5/15: Hedgies v Buffett Debate: It’s Superficial on Both Ends


A heated, if perhaps somewhat esoteric debate has been launched by Dan Loeb of the Third Point hedge fund and Warren Buffett. The debate as to whether or not hedge funds are capable of outperforming the market and whether or not Warren Buffett is a hypocrite.

You can read on this here: http://www.zerohedge.com/news/2015-05-07/dan-loeb-slams-buffett-being-habitual-hypocrite

But what you won't read in the post above is that the debate is superficial at best. The problem is:

  • Warren Buffett's investment style… setting aside his claims about it being Grahamian (aka fundamentals-driven)… is very much hedge fund-like. To see this read my post about what defines Buffett's exceptional returns here: http://trueeconomics.blogspot.ie/2014/10/28102014-buffetts-magic-cheap-leverage.html. Like a hedgie, he takes leverage. Like a hedgie (in very broad sense) he takes activist positions, often outside or beyond the secondary markets and in alternative asset classes, such as PE as well as across undefined time horizons; and like a hedgie, he has 'black box' management style; but unlike a hedgie, he has access to cheap, very cheap funding that is insensitive to time horizon of investments he takes. Finally, like a hedgie of the old, he manages risk well.
  • And the concept of a hedge fund return is, shall we say… too complex to be useful for Buffett's bet/comparative. To see this, follow the thread of links from this, back, across four posts on the topic: http://trueeconomics.blogspot.ie/2015/03/hedge-funds-returns-part-4-to-higher.html