Goldman Has 'Superb' Advice For Hedge Funds: Seek Alpha Guys

Not wanting to sound like Captain Obvious, a recent Goldman Sachs weekly portfolio strategy report advised hedge funds to select stocks with high alpha potential, stating “hedge funds tend to own stocks unlikely to generate alpha.”

Goldman Sachs runs its VIP model across Russel 1000 looking for high dispersion stocks

After noting that the average hedge fund is underperforming the stock market for the seventh straight year (currently 2 percent vs. 4 percent), the investment bank has investment recommendations for hedge funds to follow.

While the risk adjusted returns of the hedge funds are attractive (Sharpe ratio of 1.2 vs. 0.5), Goldman notes that it is the...