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Obama Years Officially The Hedge Fund Dark Ages

Thanks, Obama.
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See ya later, suckers. By White House (Pete Souza) / Maison Blanche (Pete Souza) (The Official White House Photostream [1]) [Public domain], via Wikimedia Commons

See ya later, suckers. By White House (Pete Souza) / Maison Blanche (Pete Souza) (The Official White House Photostream [1]) [Public domain], via Wikimedia Commons

Hedge fund managers have not been at all shy about sharing their feelings about President Obama over the past eight years. The tone of these opinions have ranged from whiny to petulant. Now that there are only 10 days left in the Obama administration, we can quantify what’s been making them so cranky since Jan. 20, 2009: The last 2,913 days have been pretty miserable for the hedge-fund set:

Hedge Fund Research reported that the private investment firms as a group returned 5.6% in 2016. While that was hedge funds' best showing in three years, it was still only about half as good as the S&P 500, which rose 9.5% last year.

More importantly, that marks the eighth year in a row that hedge funds have underperformed the broader market, as measured by HFR's fund-weighted composite index—the same eight years during which Obama served as President.

New hedge fund launches last year look set to be the lowest since 2008 if the rate at which new funds were launched in the first three quarters held steady to the end of 2016. Fund closures are also set be the highest in eight years.

For the first time since 2008, Eurekahedge reports that assets under management shrank, with the hedge fund industry contracting by USD21.8 billion in 2016, with investor redemptions of USD43.4 billion offsetting manager performance-driven gains of USD21.6 billion.

Some people, like Leon Cooperman, have some legitimate beef with Obama: Not only did the leader of the free world fail to properly acknowledge the receipt of the poetical works of a 14-year-old girl who happens to have one-quarter of Cooperman’s DNA, his SEC rubbed salt in the wound by calling him an insider-trader and costing him $3.4 billion in assets. The rest of them? Not so much.

The last time hedge funds outperformed was 2008, when they lost 19% compared to the S&P 500's 38% decline. Since then, though, many hedge funds have been overly bearish, focusing so much on protecting the capital they have through trendy so-called market neutral strategies to the point of sacrificing more impressive investment returns….

Magnifying the damage: The tendency of copycat hedge fund investors to follow each other into the same stocks, a dangerous phenomenon known as crowding that can lead to massive losses when they all try to dump their shares at the same time….

Indeed, Obama himself has had little direct impact on hedge funds' lagging performance, other than by perhaps crimping returns of Fannie Mae and Freddie Mac—two hedge fund favorites—and by opposing merger and tax inversion deals on which hedge funds bet big….

Overall, Obama has introduced few regulations that have specifically impacted hedge funds.

Of course, outside of certain parts of Westport, introspection isn’t normally the name of the game for the hedge-fund set. So, while we still can, let’s blame Obama for a couple of British hedge funds taking big losses in 2016, another British hedge fund firing 60 people and still another British hedge fund getting hosed by the dawn of the Trump era. Even Obama’s buddies are getting killed by the guy. Seriously: There are only 10 days left to blame him for everything. Get pinning.

President Obama Was Officially Terrible For Hedge Funds [Fortune]
Hedge fund launches heading for eight-year low [FT]
Eureka figures reveal hedge fund industry assets down over 2016 [HedgeWeek]



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