New York (HedgeCo.net) – The bandwagon of hedge fund critics gained another member over the weekend when Barron’s published an article that questioned the industry’s recent performance. In their defense, the first line of the article was, “One month does not make an investing trend,” as the article focused on the August performance of hedge funds.

Yes the industry as a whole has lagged the overall market for the better part of the last six and a half bullish phase in the market. Yes the industry as a whole fared better in August than the overall market. And yes the industry as a whole has beaten the market in all six of the months that the overall market was down in the last year. In the six monthly instances where the overall market fell and the CSHFI was able to beat it, twice the CSHFI was breakeven while the market fell, twice the CSHFI was higher and the S&P was lower and twice the CSHFI didn’t fall as much as the S&P.

One of the quotes that stood out in the article was from long-term hedge fund critic Simon Lack. “The fundamental problem is that the hedge fund industry is overcapitalized,” stated Lack.

What Barron’s and Lack fail to mention is that during the last two bearish phases in the overall market, the hedge fund industry as a whole performed much better than the S&P 500. Another observation is that you will never hear anyone say that mutual funds or ETFs are over capitalized.

Rick Pendergraft
Research Analyst
HedgeCoVest