As all of you loyal readers know, I don\u2019t think much of how the media covers hedge funds. It\u2019s rare, if ever, that I think hedge fund stories are \u2014 to quote the Fox News slogan \u2014 fair and balanced. Sometimes, though, I\u2019m pleasantly surprised to read a story by someone who doesn\u2019t seem to have an axe to grind.<\/p>\n
One such piece appeared in The Financial Times last week. The story was about a hedge fund that was already up more than 230 percent this year. In July alone, the fund returned more than 24 percent. The commodities-based fund has been able to take advantage of downturns in the market and earn an excessive rate of return.<\/p>\n
I read the article and the first four or five paragraphs really made me smile. All I was thinking was, \u201cWait, isn\u2019t this what hedge funds are supposed to do?\u201d Some might ask a different question: How much risk did he take to make those returns?<\/p>\n
Well, I have no idea. I\u2019ve never spoken to the manager. I\u2019ve never talked to anybody who works for the manager. I\u2019ve never seen documents. I\u2019ve never seen anything at all. But with that said, I am sure that the manager and his team knew exactly how much risk they were taking and new exactly what their exposure was at all times. They understood the upside and the downside before the trades were executed because that\u2019s what hedge fund managers are supposed to do: Make money. Lots of money, shared between the investors and the money managers.<\/p>\n
The problem is, that\u2019s not what hedge funds are doing. Over the course of the month, I get between 50 and 100 \u201cperformance updates\u201d from funds all over the world. The vast majority of them have had very poor numbers. The numbers are disgusting. Many funds are posting losses in the double digits for the month, quarter and year. It\u2019s just awful.<\/p>\n
Frankly, I get sick to my stomach when these \u201cupdates\u201d come in because I believe that the investors in these funds have been sold a bill of goods. That\u2019s only reinforced when I read the manager commentary that comes along with the updates. That stuff is even worse than the numbers, which can\u2019t lie. The commentary passes the buck and blames the poor returns on volatility, problems in the credit markets, and everything else under the sun.<\/p>\n
I only have one response to that commentary: \u201cGet the hell out of my face with that nonsense.\u201d A manager has one job \u2013 to make money regardless of market conditions. If you can\u2019t do that, fold up the tent and go home. Hedge fund managers aren\u2019t asset gatherers \u2013 that\u2019s for the mutual fund people. The reason hedge fund managers get paid so well is because they\u2019re supposed to make money, not put up double digit losses and complain about market conditions.<\/p>\n
So, my call to action for every hedge fund investor is to look at your portfolios. Figure out if the managers that you\u2019ve invested in are actually doing their jobs, and if they\u2019re not, fire them. It\u2019s that simple. Their job is to make money, period. It is not to manage for mediocrity. It\u2019s not to build a bigger infrastructure. It\u2019s not to have a beautiful office. It\u2019s not to have a massive art collection or their own jets. It\u2019s to make money. Tell them to get out there and do what they are supposed to do or go home.<\/p>\n
Remember HedgeAnswers is coming up quick to learn more about these great events go to www.hedgeanswers.com. I hope you can make it.<\/p>","protected":false},"excerpt":{"rendered":"
As all of you loyal readers know, I don\u2019t think much of how the media covers hedge funds. It\u2019s rare, if ever, that I think hedge fund stories are \u2014 to quote the Fox News slogan \u2014 fair and balanced. Sometimes, though, I\u2019m pleasantly surprised to read a story by someone who doesn\u2019t seem to have an axe to grind. One such piece appeared in The Financial Times last week. The story was about a hedge fund that was already up more than 230 percent this year. In July alone, the fund returned more than 24 percent. The commodities-based fund has been able to take advantage of downturns in the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[24],"tags":[],"class_list":["post-3888","post","type-post","status-publish","format-standard","hentry","category-blog"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/posts\/3888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/comments?post=3888"}],"version-history":[{"count":0,"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/posts\/3888\/revisions"}],"wp:attachment":[{"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/media?parent=3888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/categories?post=3888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/aandcadvisors.com\/ja\/wp-json\/wp\/v2\/tags?post=3888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}