This quarter's Hedge Fund Trend Monitor from Goldman Sachs had an interesting graphic comparing average hedge fund returns with those of mutual funds, the S&P 500 and Goldman's own 13F-derived strategy called the Hedge Fund VIP Basket.
A few observations can be made:
- Hedge funds have underperformed mutual funds so far this year. To be fair, however, I'm not sure how meaningful it is to compare hedge funds (which almost always have short exposure) to mutual funds (which are almost always long only) in a market environment that is generally rising over such a short period of time.
- The average active manager (irrespective of whether they are a hedge fund or mutual fund) has underperformed the S&P 500.
- About 20% of hedge funds have outperformed the S&P 500 so far this year
- Goldman Sach's 13F-derived VIP Basket strategy is outperforming the S&P 500. The basket represents the 50 holdings that appear most frequently amongst the ten largest holdings for the 696 hedge funds tracked. The strategy is completely passive in that it makes no attempt to filter managers.
- By contrast our AlphaClone Select strategy filters managers in our universe using our Clone Score methodology and holds 30 positions. Despite being in a market neutral posture for all of January, the strategy has outperformed GS's VIP Basket by 150 basis points and ranks within the top 10% of all hedge funds this year.