Wednesday, January 31, 2007
Are Hedge Funds Now Worthless on Average?
Provocative post title, hehe :-)) I was doing some financial reviews and saw that my core indexed holdings returned 17.1% in 2006. I call them the "Krypto Fund" after my dog, Krypto, who is paid dog biscuits to push the key on my keyboard to do the asset reallocation. The Krypto Fund excludes all my active trading, long-term "alpha" stocks & my commodity trading returns; it's purely diversified index funds and gold & silver. The CS/Tremont Hedge Fund Index showed a return of 13.86% for 2006 - not so good versus the Krypto Fund. The difference between the Krypto Fund return and the hedge fund index return is accounted for the huge fees their management slurps down. This isn't really surprising since the huge number of hedge funds and their trillions really can't beat the averages anymore - they are part of the averages. They just churn & churn & feed at the trough. Spare me the comments how SAC & some others are super - no doubt they are. So was Peter Lynch in the mutual fund universe. Superstars in investing, like supernovae in the universe, do exist, but they are very few and scattered sparsely around in space & time. QED.