Hedge funds are delivering financial crisis performance-but there is no financial crisis
According to hedge fund research firm Preqin, September marked the fourth consecutive month of negative returns, making this the longest negative period since June to November 2008.
In other words, it's the longest period of negative returns since the height of the financial crisis, yet there's no crisis at the moment.
To date, the average hedge fund is up only 0.18%, putting hedge funds on track for the lowest returns since 2011, Preqin said.
The strategies getting hit the hardest are equity and event-driven. Relative value funds have been the only bright spot, with the average fund posting gains of 4.11% so far this year.
The titans getting bruised
A number of big names have been getting bruised, especially after the volatility in August.
Here's a scorecard based on performance data from HSBC, investor updates, and media reports:
- Third Point Offshore (Dan Loeb): -4.4% (through Sept. 30)
- Pershing Square Holdings (Bill Ackman): -9.6% (performance through Oct. 13)
- Marcato International (Mick McGuire): -11.6% (through Sept. 30)
- Paulson Advantage (John Paulson): -12% (through Sept. 30)
- Omega Overseas Partners (Leon Cooperman): -12.02% (through Sept. 30)
- Glenview Capital (Larry Robbins): -13.5% (through Sept. 30)
- Greenlight Capital Offshore (David Einhorn): -16.88% (through Sept. 30)
- Fortress Macro Fund (Mike Novogratz): -17.49% (fund closing)
Of course, these names aren't necessarily indicative of the entire industry, which is comprised of nearly 10,000 hedge funds.
Hedge funds on average are still outperforming the S&P 500, which is down about 3.14% this year.
What about the fees?
Still, the less-than-stellar returns have renewed questions about hedge fund compensation. Generally speaking, hedge funds aim to control risk and generate profits, no matter what the market is doing. For some, that performance just isn't there.
Some are killing it
Burbank, who killed it betting against subprime in 2007, has been calling for another another crisis. This time, it will be a liquidity crisis where if the market sells off again there simply won't be enough participants to take the other side of the trade.
It hasn't happened yet, but it's "going in the path of inevitability," he said.