{"id":3272,"date":"2016-06-06T16:50:57","date_gmt":"2016-06-06T20:50:57","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/time-to-steer-clear-of-hedge-funds\/"},"modified":"2022-02-26T13:22:14","modified_gmt":"2022-02-26T13:22:14","slug":"time-to-steer-clear-of-hedge-funds","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/time-to-steer-clear-of-hedge-funds\/","title":{"rendered":"Time to Steer Clear of Hedge Funds?"},"content":{"rendered":"<p>2015 emerged as one of the toughest years for the hedge fund industry, recording the highest number of liquidations since 2009. With 979 funds closing shop and 968 new launches, 2015 was the first year to see liquidations exceed new launches since 2009. Furthermore, Q4 2015 was the first quarter to experience <em>net outflow<\/em> of capital ($1.52 billion) since Q4 2011 (according to Hedge Fund Research, Inc.).<\/p>\n<p><strong>What\u2019s Going On?<\/strong><\/p>\n<p>There are a confluence of factors at play, such as:<\/p>\n<ul>\n<li>Investor\u2019s reduced risk appetite (causing reallocations, i.e. increased redemptions)<\/li>\n<li>Massive liquidations of holdings by exiting funds on an institutional level<\/li>\n<li>The average hedge fund manager having a difficult time in a fickle market that is trending higher but quite unpredictably<\/li>\n<\/ul>\n<p>All of these factors together could have a role in eroding existing funds\u2019 returns.<\/p>\n<p><strong>Speculative Bets Don\u2019t Guarantee Sustainable Results<\/strong><\/p>\n<p>According to Hedge Fund Research, Inc., the HFRI Fund Weighted Composite\u00a0index had returned a positive +3.3% in 2014, but fell -0.9% in 2015. The decline in hedge fund performance affirms the often-stated but equally ignored fact that past performance is no guarantee of future results. Just look at what happened with Bill Ackman\u2019s Pershing Square Holdings. After ranking among the best performing hedge funds of 2014, its gross returns plummeted to a <em>negative<\/em> -19.3% (versus S&amp;P 500 Total Return\u2019s +1.4%) in 2015. Glenview Capital Management, another marquee name in the business, is down -15% this year through February after substantial losses last year.<\/p>\n<p>One of the pitfalls of the hedge fund industry is the over-fixation on quick wins\u2014which leads to generating speculative bets. Fundamentals-based discipline typically takes a backseat, which can have negative outcomes. For instance, 50 stocks that , 2016.<\/p>\n<p>Furthermore, hedge funds\u2019 limited transparency has caused concern \u2013 another reason why some investors may be shying away from these funds, particularly under vulnerable market conditions. Pershing Square Holdings, for instance, publicly discloses only 11 of its stock positions, and 8 of those positions are down while just 1 is up more than +1% as of March 8 this year.<\/p>\n<p><strong>Bottom Line for Investors<\/strong><\/p>\n<p>Leverage and limited transparency may be a bit much to handle for jittery investors given current market dynamics. A fundamental, long-term approach, though not as \u2018sexy\u2019 and unique as some of the strategies afforded by hedge funds, may produce better returns over time. Stay abreast of economic news (we\u2019ll help). Be aware of corporate fundamentals (we\u2019ll help here too). Think long term. This is our approach at Zacks Investment Management. The benefits are reflected in the five investment strategies we have ranked in the top 10% of their respective classes according to Morningstar\u2014we call this our \u2018Dean\u2019s List.\u2019 Learn more about these strategies by clicking below\u2026<\/p>\n<p style=\"text-align: center;\">\n","protected":false},"excerpt":{"rendered":"<p>2015 emerged as one of the toughest years for the hedge fund industry, recording the highest number of liquidations since [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,72],"tags":[],"class_list":["post-3272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investor-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3272"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3272\/revisions"}],"predecessor-version":[{"id":11331,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3272\/revisions\/11331"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}