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They are supposed to be the smart money—the best of the best—yet they can’t even beat a basic Treasury bond fund.
Hedge fundsas a group are badly underperforming this year, which could lead to a series of redemptions, closings and rethinking of the lofty fee structures the managers of these alternative vehicles enjoy.
The Bank of America Merrill Lynch global diversified hedge fund composite index returned just 1.3 percent in the first half of 2012, well below the S&P 500’s 8.3 percent gain.
Funds that focus on betting against stocks performed the worst, falling 7.1 percent as a group, according to the report.
Perhaps even worse than their underperformance of the S&P 500 was that the group trailed the iShares Barclays Treasury Bond ETF, which is up almost six percent on the year.
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“If you’re a fundamental stock picker, good luck earning your 2 and 20 in this environment,” said Gina Sanchez, director of equity and asset allocation strategy for Roubini Global Economics. “Macro risk hasn’t been this high since the Asian crisis.”
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