Nov 13, 2019

Hedge funds could lose more cash after another weak month

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Reproduced from eVestment: Table: Axios Visuals

Hedge funds again lagged the returns of U.S. stocks as well as a combined fund of 50% global stocks and 50% global bonds in the third quarter and in October, according to data from eVestment.

Why it matters: Hedge funds aim to deliver consistent returns for investors that outperform during times of market stress, but despite increased uncertainty and geopolitical tensions in Q3, the industry saw negative returns on an overall basis.

  • Even equity hedge funds on average underperformed the S&P 500, while financial derivatives funds were the worst performing of all categories last month, showing a 1.33% decline.
  • The only hedge funds to outperform the S&P in October were those with large exposure to China, India and Russia.

What it means: With the stock market again in favor, investors are likely to pull even more money out of hedge funds given their lackluster performance during the third quarter.

The big picture: Year to date, not a single major category of hedge fund has outperformed the S&P and the only hedge funds that delivered better returns than the 50% global bonds and equity fund were those dedicated to Chinese and Russian assets.

Go deeper:

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There may only be huge hedge funds left soon

Illustration: Rebecca Zisser/Axios

Bad news has continued for the hedge fund industry this year. Overall hedge fund returns have continued to trail both the S&P 500 and a mix of 50% global stocks and 50% global bonds by a wide margin.

What's happening: There are too many hedge funds, and too many of them are using simple hedging and shorting strategies that don't work, Dev Kantesaria, founder and portfolio manager of Valley Forge Capital Management, argues. And that may be changing soon.

Go deeperArrowDec 5, 2019

Traders keep selling stocks and stuffing cash into savings accounts

Data: Investment Company Institute; Chart: Andrew Witherspoon/Axios

The return of bullish sentiment that has driven the stock market to fresh all-time highs hasn't dented the safe-haven appeal of money market funds, which are akin to savings accounts or holding cash.

Why it matters: In fact, data shows investors are still selling equities on an overall basis and moving that money into money market funds.

Go deeperArrowDec 6, 2019

A record amount of money has been pulled out of stocks in 2019

Data: ICI; Chart: Axios Visuals

Traders still don't trust the stock market's run and are moving money out of equities at a historic level, despite a 25% year-to-date gain for the S&P 500.

What's happening: Data from the Investment Company Institute shows money has been pulled out of equity mutual funds and ETFs in every month this year except January.

Go deeperArrowDec 9, 2019