Hedge Funds Enter 2016 Facing Same Scrutiny As One Year Ago

New York (HedgeCo.net) – In a year when hardly any asset class experienced decent gains, the hedge fund industry lagged the overall stock market again and now the industry is once again facing scrutiny on whether they can produce the returns that would justify the fees charged.

Look at the different asset classes in 2015—the S&P, including dividends, gained 1.24%, oil fell over 30%, gold fell over 10% and even treasuries struggled as the Fed toyed with investors and kept them on edge about a rate hike that ended up not coming until December.

Bloomberg even published an article last week entitled “The Year Nothing Worked: Stocks, Bonds, Cash Go Nowhere”. Meanwhile, The Wall Street Journal published an article on Friday entitled “Wasted Opportunity: Hedge Funds Falter” and the article’s main point was that 2015 provided an opportunity for the hedge fund industry as a whole to beat the overall market for the first time since 2011.

Granted the hedge fund industry’s goal is to make money for clients in any market environment, but when nothing is moving, it is difficult for anyone to make money. Then when you consider how the biotech sector and the Chinese market both made complete reversals in July and June, it was a tough market all around. Biotech was the leading sector domestically up until July and then completely reversed course. The Shanghai Composite gained almost 60% through mid-June and then it reversed sharply.

While hedge fund managers are among the best and brightest the financial world has to offer, they do not have a crystal ball.

Rick Pendergraft
Research Analyst
HedgeCoVest

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