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by 30thElement 4411 days ago
The second point is actually a point for hedge funds. The S&P 500 went from a high of 1576 near the end of 2007, to a low of 666 in the beginning of 2009 (October 07 to March 2009, specifically). Commodities had similar losses. If hedge funds only lost 20% when the general market lost almost 60%, they are a pretty good hedge against risk.
2 comments
simon_ 4411 days ago
This is one example of a number of ways the article is weirdly disingenuous. Thea author compares returns to equities but risks to nothing, as you point out. Separately, when he cites an estimate of 3.01% annual return from alpha and 4.62% from beta, all he has to say is that "most" of the returns are from beta and that fees are high, pretending not to understand that returning 3% per year due to alpha after fees would actually be quite impressive and valuable.
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shkkmo 4411 days ago
Except the author also states:

>Gross of fees, the annual return to investors over the period from 1995 to 2009 was 11.42 per cent. Management and performance fees reduced this figure by 3.79 percentage points.

to 7.63 combined from alpha and beta

>Over the same period, the S&P 500 generated an annual return of 8.04 per cent.

The author's point is that saying '%3 per year due to alpha after fees' is disingenuous since the returns aren't actually higher.

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shkkmo 4411 days ago
It's pretty disingenuous to compare numbers from two different time spans. I don't know where the authors numbers come from but he says the drop was 20% in 2008.

Your numbers add an additional 6 months during which the S&P 500 dropped significantly: https://www.google.com/finance?q=INDEXSP:.INX

additionaly, the time period you cite seems hand picked to start at the high and end at the low.

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30thElement 4410 days ago
You're right, the period was "hand picked", but that's because I was looking at a 5 year graph with the high and low marked, and just used those numbers. The movement before/after 2008 wasn't the 40 percentage points that would be needed for the hedge funds to do as poorly as the market, so I didn't bother.

But I just looked the exact numbers up. The S&P 500 opened January 2nd at 1467.97 and closed December 31st at 903.25. A 38.5% loss instead of the 60% I said, but that's still almost twice the loss of the hedge funds.

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