[hpkuarg]

Not the GP, but I think they mean that there has been no point in hedging (hence "hedge fund") risk in the world of Fed-driven asset prices. If the Fed has your back to BTFD every time (and just look at the S&P 500 since the Covid crash -- a 30% loss was made up for in just six months), why bother trying to seek alpha to beat the market by trying to buy under-appreciated assets and sell over-appreciated ones? Just buy everything. And if you still want alpha, you just apply leverage. This last part leads to big volatility whenever there is a trigger.

[qeternity]

Alpha should be risk adjusted (a la Sharpe/Sortino), but broadly your answer is correct. Current Fed policies punish those who don’t take risk, by design. Hedge funds (in theory - ahem) are structured to maximize risk adjusted profits. But if there’s no risk, because the Fed has made it so, then there is nothing for hedge funds to do but accept the new casino world for what it is: play along and hope that the Fed can control whatever comes our way. It’s a fools errand to hedge...until it isn’t.