An impression that diminish recent work 1

Peace, love, and high yields. "This was before the credit crisis"sub-prime", the slogan of the Woodstock of the managers of"hedge funds", the annual Conference of HedgeStock, which was held in a bucolic garden North of London. The community was there a way to entertain and to exchange the latest stock pipes, what it does in more restricted and confidential space (read below). Because the actions have always represented one of the hunting grounds favorite of hedge funds, since they represent, according to estimates, between one quarter and one third of the assets of "hedge funds" globally, such as those that are invested on the so-called "long-short" strategy (which is to buy and sell shares in the open). In 2009, a "long-short" funds won on average 20,17, i.e. an annual return of 10 over thirteen years (1997-2009), according to the indices of the Edhec. Much better than the S & P 500 index, which grew on average per year 6.5 since 1997, and, moreover, with far fewer risks. Hence, apparently a high added value.

An impression that diminish recent work (1). Indeed, ultimately, their selection of values added that a relatively modest performance over traditional managers. "hedge funds" see their portfolio performance enhanced by 2.15 per year through their choice of values and long period (1986-2004), and traditional managers of 0.82 per year. The gap of 1.32 per year for the benefit of the first appears fairly modest. It is carried out when the Internet bubble, and evaporates if one takes into account costs, very senior in the alternative world. The bulk of their performance, "hedge funds" get it on purchases of securities positions vendors in the open with a marginal contribution to their overall performance. It is also what we see in the case of ""hedge funds"Canada Dry", launched by traditional management companies to the disappointing performance (see box above).

Results forecast

The resounding scandal of insider trading involving the "hedge fund" Galleon had reignited the controversy: hedge funds apparently a part of their astronomical gains of leaks on the part of corporations. A study (2) contradicts the presupposition of a systematic of hedge funds and privileged access to certain information on the part of companies. "hedge funds" as a group of investors are not best expectations that other stakeholders on the results and future benefits of firms. More action is massively held by hedge funds a quarter given, most stock market performance will be high in the quarter and the year after. A stronger impact for large values for small and medium-sized companies. If, at the end of the quarter, an investor bought the 20 shareholding of the most heavily "hedge funds" and sold 20 of securities the more weakly, open, and that he retained this portfolio a quarter, it emerging annual performance between 11.3 and 6, according to the models. So closely tracking entries of "hedge funds" might prove a pay strategy. They are interested in shares which have quite different characteristics from those which attract the attention of traditional management companies. Thus, they prefer companies followed by few financial analysts, securities less liquid and more volatile than those treated by conventional managers. Values neglected rating and not the more transparent, is that they believe could win the most money. They also have a rate of rotation of their portfolios much higher than traditional managers, with a gap of 1-2 for the first study. Brokers like these clients, certainly very demanding that pours large brokerages. Make they their it well. "hedge funds" are particularly well informed about all the rumors, noises and other market information... What enable them to identify small trading profits, which, placed end to end, can make a difference with the conventional managers less active and less present in the market.