News Digest: Equity hedge funds lose $150 billion over five years
February 10, 2024
News Digest:
Equity hedge funds, known as among the oldest and most popular fund strategies, saw client withdrawals to the tune of around $150 billion over the past five years. A news report said this was due to investors tiring of their inability to capitalize on bull markets or guard against slumps.
The equity long-shorts that seek to buy stocks likely to do well and bet against those that could perform poorly, have underperformed the markets in nine out of the past ten years, says the report quoting Nasdaq eVestment.
Takeaway:
The poor performance and outflows were a result of these funds failing to adapt to markets that central banks have dominated. In the past, these funds were known for their star story pickers that allowed equity long-shorts to hedge against overall market fluctuations by betting on both winning and losing stocks. Data group HFR notes that the strategy made double-digit returns in almost every year of the 1990s bull market.