This past decade it has been nearly impossible to beat the US index as Apple, Microsoft, Amazon and the rest of big tech have been the best performing stocks. But active managers have always said, when there is a market downturn that is when they’ll earn their fees. According to this analysis from Bloomberg, many of these active managers haven’t been covering themselves in glory in this market downturn.
America’s S&P 500 is down 23% year to date, while Bloomberg write that America’s hedge funds are down 15% year to date. Which, to be fair, is still an 8% outperformance. But many of the biggest names in active management are down far more than that, headlined by Chase Coleman’s Tiger Global which is down 52% for the year.
And investors in these hedge funds are discouraged. They have withdrawn $25 billion from long-short funds this year and the rate of new fund formation has also slowed, 140 new long-short hedge funds this year compared to an average of 550 annually for the past 10 years.
If stockpicking geniuses underperform the index in a bull market and then many of them fall further than the index in a bear market, they’re going to have trouble convincing high-net worth individuals, endowments, pension funds and other investors to continue paying their fees.
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