Barclays Prime Brokerage: Over Past 4.5 Years Hedge Funds Generated Negative Cumulative Alpha

HFA Padded
Mark Melin
Published on
Updated on
The news for run-of-the-mill hedge funds in a Barclays prime brokerage piece is not entirely positive. The study of 340 hedge fund investors with over $8 trillion in assets noted general dissatisfaction over recent performance. The study highlighted that for the last 4.5 years hedge funds generated negative cumulative alpha which topped in May 2011. Amid losing hedge funds, where allocators expect to pull investments, there are also winners – pointing to an interesting if yet unidentified major trend in investing. But notes liquidations are coming stating:
We expect HF liquidations in 2016 to rise to 12% from a recent historical average of 10%, given the performance challenges of 2015 and early 2016. Additionally, if 2016 HF performance continues at, or falls below, the annualised 1Q16 / 2H15 levels, the industry may face a reduction in AUM as net new flows are unlikely to be additive.
Also see Hedge Fund Alpha Drops 1700 Basis Points in 11 Years [dalio] Rip-hedge-fund-alpha Barclays HF 8 10 headline and fee and lame strategy Hedge Funds

For the hedge fund industry, size does matter and bigger isn’t always better

The Barclays study of institutional investors who represent nearly $7.7 trillion in assets under advisement was pointed in several regards, addressing industry challenges but also pointing to opportunity. The report addressed the topic of “how big is too big,” pointing to a diminishing return potential once a hedge fund gathers too much in assets. The report shed light on how institutional investors are increasingly viewing their hedge fund allocations from a new perspective. The study, which included 73 hedge funds of funds, 66 family offices, 39 endowments and foundations, 38 investment consultants, 37 “other investors,” 30 public pension plans, 26 private pension plans, 18 private banks and 13 insurance companies, found that half of those surveyed believed hedge fund investments did not meet their expectations over the last few years. [swpm_payment_button id=2022964]

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HFA Padded

Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.