From our Obsession
Future of Finance
New technology is upending everything in finance.
Pity the hedge fund manager.
The elite, highly compensated men—they’re mostly men—who run money for the world’s wealthy are having a devil of a time finding a way to make decent returns. As an asset class, hedge funds lost 0.4% during the first quarter, according to research firm Eurekahedge.
That might not sound like the end of the world. But it’s an especially poor showing, when you realize that investors who simply bought index funds tracking plain-vanilla benchmarks for stocks, such as the S&P 500, or bonds, such as the Barclays Aggregate US index, fared far better. The S&P 500 and the Barclays Aggregate returned 1.4% and 3%, respectively, for the first three months of the year.
Hedge fund clients have noticed that they’re not making money. As a result, they’ve yanked roughly $15 billion in assets from hedge funds in the first quarter, the worst stint of redemptions since 2009, during the nadir of the Great Recession.
Of course, hedge fund managers can argue that while they might be trailing the big indexes this quarter, when they win, they’ll win much bigger than they’ve lost, making their services worth the high fees they charge.
But the surge of withdrawals suggests more and more of their clients don’t see it that way.