Why Hedge Funds Are Such a Colossal Waste of Money

by | Aug 26, 2015 | Commodities, Conspiracy Fact and Theory | 58 comments

Do you LOVE America?



    This article was written by Joshua Krause and originally published at the Daily Sheeple.

    For most people, the stock market is an mysterious force that they will never understand. It might as well be a glittering slot machine as far as they’re concerned. They don’t know how it really works on the inside, all they understand is that the machine is known to pay out big from time to time. Of course, that doesn’t discourage them from trying their hand at the casino anyway. When the average person wants to place their bets on the stock market, they turn to the experts. They go to the hedge funds and hand them their savings and say “here’s my money, make it rain please!”

    Unfortunately for these poor dupes, real stock market “experts,” that is, people who can consistently pick good stocks over many years, are slightly more abundant than unicorns. In reality, most experts are a joke. The recent stock market crash as revealed (probably not for the first time) that hedge funds are often horrible investments.

    Bloomberg recently did a report on what are referred to as “hedge fund hotels.” These are companies where various hedge funds own at least 25% of the stock. While concentrating their money on a few stocks is profitable for a while, it can easily end in disaster. When the stock market slides, these hedge fund’s losses could be best described as disproportionate.

    While the S&P 500 fell by roughly 10% over the past week, the 5 companies that Bloomberg reported on lost anywhere between 21% and 42% of their value. All told, these companies had between 26% and 48% of their stocks, owned by hedge funds. These companies were the favorite picks of the experts, and they failed spectacularly.

    Of course, this is nothing new. These companies have been a terrible bet for a long time, since they routinely under perform current market trends. A Standard and Poor’s study conducted in 2009 found that the vast majority of mutual funds (those would be hedge fund’s cheaper and less risky brother) can hardly reach their benchmarks.

    Investors in actively managed mutual funds the last five years have reason to wonder what they’ve been paying for: A new study from Standard & Poor’s finds that 70% of large-cap fund managers who use the S&P 500 as a benchmark for comparison have failed to match the performance of the index over that time.

    That’s double bad news, given that the index was down 19% in the five years that ended Dec. 31.

    The failure of active management is replicated across almost all categories, not only U.S. stock funds but also bond funds and even emerging-markets funds. What’s more, those numbers are similar to the previous five-year cycle.

    From the close of Dec. 31, 2003 to Dec. 31, 2008, the S&P 500 dropped 18.8% — but that was still enough to beat 71.9% of U.S. actively managed large cap funds, according to S&P Index Services.

    “We consistently see that once you extend time horizons to five years, the majority of active managers are behind their benchmarks,” said Srikant Dash, global head of research and design at S&P.

    All told, between 70 and 89 percent of the stock managers in the study, under performed the stock market depending on their field of expertise. In other words, you could probably pick a better stock by flipping a coin or consulting a palm reader. You could probably outperform most hedge funds by picking the stocks that they don’t want. You might even do better than most experts by throwing darts at the financial page of the newspaper.

    This also means that on a long enough timeline, your best case scenario is not losing any money. If various indexes are outperforming most “expert” opinions in both good times and bad, then on a long enough timeline you would probably lose money. You would only make a little money when stocks are hot, and then lose all of your gains on the next correction.

    So how do these companies stay in business? It’s simple really. They have great PR. They’ve convinced everyone that they are the go to guys for picking stocks. But more importantly, they make money no matter what. Most funds will charge a small annual fee that you must pay no matter what happens, and then they charge 20 or 30 percent of any profits that are made. So they obviously want to pick good stocks, but there are no consequences for picking bad stocks. When the market crashes, their investors can lose everything, but they will stay above water.

    Basically, if this were a gold rush, the hedge funds would be the merchants. The vast majority of the miners won’t make any money in the long run, but the guys selling pickaxes and shovels will always make a profit. Hype is the only thing keeping them in business, much like the rest of our economy.


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      1. When you involve yourself with thieves, you get robbed.

        • I prefer to trade my own stocks back when before it was all traded on emotion or momentium. Or Physical PM’s in todays market. Brokers, hedge funds, all shisters. They will usually put their own trade orders in on a stock before you get your order in. You are not their priority, you are just a feed bag client fish.


          • wwti, hope all is well at the BOL.
            I wish the best in all you do to improve your camp…
            When you start from scratch, you make your own ‘Ponderosa’.

            May all be well here…

        • Hillsdale College is now offering the following free online courses:

          Constitution 201
          Western Heritage
          American Heritage
          Economics 101
          Constitution 101 – 2014
          Great Books 101
          Great Books 102
          The Presidency and the Constitution
          K 12 Education
          Federalist Papers
          Constitution 101

          • At a moment like this, who is thinking about education Acid?
            Free Online Courses? No such thing, somebody is paying for it and the end results is the Tax Payers.

            Hillsdale College, where a person can get an indoctrination in Liberal Arts and spread the disease onto our youngsters.
            Thanks, but no thanks.
            I personally enjoy the Mortuary Business.

            • I think you haven’t a clue what Hillsdale is.

              They are about the only college in the country that takes ZERO government handouts, and can therefor pursue a genuinely conservative curriculum. And they do.

              That’s right. ZERO taxpayer funds, in case you missed it.

            • Zyklon B

              You are wrong about Hillsdale and education. It would be nice to have people on the other side of this who understand real history. People who also understand real economics, the constitution, and our founding fathers. Hillsdale is the only college I know of that teaches the real thing.

              • They are also the only college I know that has hosted a gun show. I’ve been there. Nice campus.

          • thanks for the heads up Acid

          • Sounds like a recruitment course for domestic terrorists.

          • “Hillsdale was the first American college to prohibit in its charter any discrimination based on race, sex, or national origin. Associated with the anti-slavery movement from its earliest days, it attracted to its campus anti-slavery leaders such as Frederick Douglass and Edward Everett, who preceded Abraham Lincoln at Gettysburg. Several of the College’s leading men were instrumental in founding the new Republican party up the road in Jackson, Michigan, in 1854. And Hillsdale sent a larger percentage of its students to fight for the Union in the Civil War than any other American college or university except West Point. Two of those Hillsdale veterans helped carry Lincoln’s casket to the slain president’s final resting place in Springfield, Illinois.

            Hillsdale’s modern rise to national prominence began in the 1970s, when the federal government attempted to impose a host of regulations on the College—including racial quota requirements that violated Hillsdale’s principled policy of nondiscrimination. When the Supreme Court upheld these regulations in the 1980s on the basis that Hillsdale students received federally funded grants and loans, the College decided to refuse even this indirect form of federal aid, replacing all federal student aid with privately funded grants, loans, and scholarships.”

            • Now that’s good to know, thanks.

        • That “TV murder” is fake as fuck. Nice fucking try, government.

          • Cid, remember honey? Oh, I apoligize, WWTI said human excrement draws more flies….
            ACID, JUST KIDDING….

            You do add excitement here, and do like your appraisals on clothing.
            I like Carhart myself, but to each his own…

            • More of a faded Levis 501 and long sleeve LL Bean T guy myself
              Cotton, the original performance fabric

              • Levi’s? Are you kidding ?
                Come on Kfarmer
                Those anti 2nd amendment fucks I won’t wear their pants or support their views against my country and our liberties
                Dam man I’m disappointed

      2. Aw fug it. I can’t figure this shit out. Dow up 600+ points today. What’s a boy to do. Guess the train keeps a rollin.

        • when the feds DUMP money into the market to prop it up, what do you expect!! it is a rigged game and has only got worse over the last twenty years or so!

          • The grand illusion.

        • The government crash team is what got involved today. You can count on it.

      3. Attempted gun grab coming next month? If so, the blood bath will begin, gear up and hold on tight. Way too much shit going on all over the world for it not to explode somewhere at any time. The killing will be horrendous, draw your love ones so close that it hurts. Ask the question to everyone you know; Are you prepared and are you prepared to die. Get right with GOD ALMIGHTY for he is your only salvation in this troubled time we are facing. “The Eve of Destruction” is upon us.

        Stay safe my friends. For what it’s worth is done and going to hunker down, wait and pray. DO WHAT YOU HAVE TO NOW NOT LATTER!!!

        • Excellent advice on all points.

          “Let your loins be girt, and lamps burning in your hands.”
          Luke 12:35

        • “FOR”
          What tells you or where did you get your INFO on a gun grab coming in September?

          • Sgt: Just a guess on my part, but it will happen soon and as you can see it was a question that I had. Gut feeling if you will. With all these shootings going on and now on MSM who the hell knows any more. Sgt. old buddy you know as well as I do its coming.

            • “FOR”
              If or when it comes. Put me on the side that will say HELL NO I’M NOT TAKING THIER GUNS! Fire me if you must, and You will fight me to the death.

              I have said it a thousand times. I WILL NOT SET BY AND LET THEM TAKE YOUR GUNS!


        • I’m not to concerned about a gun grab. Sure, they may confiscate some during traffic stops or something along those lines, but they WILL NOT go door to door to grab them. To many citizens with guns and not nearly enough willing souls to risk their lives trying to take them from we the people just because a tyrannical government orders it.

      4. Hedge funds is what made Soros wealthy in the 70’s

        • Here is a good article on gold…

          ht tp://www.planbeconomics.com/2013/03/money-is-debt-gold-is-money.html

          • In case some do not know, the first international hedge fund was started by Soros and Rogers. I remember the commercials in the 70’s for the “Quantum Fund”….

            ht tps://en.wikipedia.org/wiki/Quantum_Group_of_Funds

            Sure it Wiki, but it is true.

            Now think of Soros and his owning the company that runs the machines for voting….

            SORRY, seems to be a slow night…

      5. I got my wife out of them. I never had anything in the markets. If it was up to me she would cash it all in and buy silver and gold.

        • DIVERSIFY

          You don’t need to keep EVERYTHING in gold.

          If you ask me this PM crap has been carried way too far.
          Who the fuck would you sell it to in SHTF? It makes you a target. Who the fuck will you sell it to in normal times? The PM dealers for pennies back on the dollar.

          PMs are a fucking ripoff.

          AE knows a fucking scam when I see one.

          • Not everything that glitters is gold.

          • AE
            I agree Diversify
            Some PM’s Some Food Some AMMO, ECT. ECT.

            • BWAHAHHAHAHA good one!

          • I think I finally got through to him !

      6. Hedge Funds can be waste but how about the dancing bodies of the HF Manages who made and still making billions? PRICELESS.

      7. Hey Katy, just been running numbers through my calculator and came up with some very depressing quotas… Firstly I have enumerated that of the 35 000.000 survivors of SHTF an amazing 299.999 who do actually manage to literally survive the dreadlock tattooed cabal mass onslaught of the mass cabal white woman rapping government agency ass clowns WHO will be able to hoodwink David Hodges by cunningly disguising themselves by wearing those cheap Halloween masks… “CHEATS” by 100.999% like that’s SO bad… After further and indisputable calculations on my trusty calculator on behalf of the most likely SHTF survivors I have had to recalculate my overall input data… The percentage of what isn’t looking too good, so I’ll need you to come over to the lab and help me run some new figures… Hope I haven’t disturbed your plans for the day but this is bad, bad, bad… Katy, I THINK WE ARE TOTALY SCREWED…
        Houston is under the command of the agent cabal.

        We need to get moving.

        Today is yesterday and tomorrow is then.

        Be seeing you at the lab.

        Make sure you’re not tailed!!!


        Science Hits The Fan…

        I love it.

        • Hey Sci Guy ,
          HCKS is trying to get a point across as fiction , if something does happen no one is going to believe the magnitude . Point read the congressional report on EMP commissioned by congress .
          9 out of 10 Americans dead within a year if the grid goes down . There are countries out there with EMP capability (PDRNK) fact . ) Recient reports of NK subs estimated 50 have left there ports ( janes defense weekly ) for where about’s unknown .
          Right now the world is a powder keg with a lite match.
          Any person with eyes to see the outcome may become grim with the blink of an eye .
          Prep for yourself to be able to help others rebuild when the carnage ends and it’s going to be massive , no country has every completed collapsed in modern times especially a nuclear armed one . The world may not stand by and watch us tear each other apart they may partition us and have areas of occupation like in post war Germany . Those that survive the initial man made cataclysm may not like the aftermath , we may be forced to fight a war of insurgency for years before gaining our republic back or at the worst perishing as a society .
          Things may very well go midevial before it ends.
          It’s up to the individual to prepare as best they can
          Time is short , Hugh you loved ones , enjoy the time now because this may be the best we will have in the present right now. Before we endure the long night ahead of us.

          Semper Fi

      8. I’m a really conservative guy. Stock market
        is not a casino. It is a life long commitment.
        Later in life you convert to safer investments.
        I choose land, shelter, and self sufficiency
        which was paid for by calculated efforts
        in my youth. Market is over priced and the
        PM guys are going to eat you.
        Think about used cars sales men, do you trust
        their advice?
        Tangible assets are where to go.

      9. God bless Marcy Borders… 9/11 Dust Lady. RIP. xXx

      10. you could invest in shoe backed securities

        “Would You Finance Your Kicks?”: Shoe-Backed Securities Are On The Way

        h ttp://www.zerohedge.com/news/2015-08-26/would-you-finance-your-kicks-shoe-backed-securities-are-way

        I think at this point the human race is pretty much done

      11. Over at the Daily Sheeple with this same article, a poster wrote a thing about religion / faith.
        Makes one wonder…

        late2theParty disqus_3BrONUAJno • 9 hours ago

        How do you KNOW that a creator doesn’t exist? I’m not asking you to prove they exist, I want proof that they don’t exist. Wait, how do I know you exist?

        IF you are scientifically honest, you can only say 3 things-

        1) Since most of the facts about the universe are unknown (we know far less than there is to know) – we don’t know IF there is a God, only that there is no proof that such a person/thing exists, NOR is there proof that they don’t exist. So atheism is as much faith as theism. Only agnosticism is ‘pure’ science; we don’t “know”.

        2) That any set of beliefs is a religion, whether that religion is theistic or agnostic, like science. They constitute a set of hypotheses that a human has generated and lives their life based on. Organized religion is just people codifying their beliefs as a group.

        3) All information that is not directly experienced by you, and even some that is, is all faith. Whether faith in a ‘person’ or in a group, it is belief. Can you physically hand me an electron? Can you pass me a cup of black hole? I’d like 4 gallons of x-rays please! All these things are taken on faith in science because we see the effects of something and the theories I listed all make sense and can OFTEN be used to predict the universe’s behavior. Still, I can’t experience bosons and pulsars with my plain jane body; so I take it on…faith.

        You are right about the stock market, it is betting on betting** on loans. These people actually do not create anything but numerical wealth, they do not make anything, do not increase output and do not save lives. Their behavior actually reduces the ‘value’ of money because they make money by not actually doing anything. As each dollar is made in the market by anything but direct loans to the manufacturing companies for capital expansion, the pool grows bigger but the actual man-hours stays the same. Derivatives prove the stock market illusion has reached beyond it’s healthy level.

        If you are going to slam ‘religion’, you might want to study it and science a bit more before proclaiming “There is no …”

        ** And bet on that betting that bet on those bets, that bet on those bets, that…ad inifinitum.

        • Excuse me planners, I meant to include the poster who started the thread.

          disqus_3BrONUAJno • 14 hours ago

          Since unicorns are as imaginary as the gods man has imagined, anything that actually exists would be massively more abundant than something that doesn’t exist. Stock market experts are non-existent for the same reason that there are 200 different Christian denominations, all trading on faith, which is a virtual synonym for superstition.
          There is a tiny difference between investing in stocks and in a Madoff scheme. Madoff is the new Ponzi, having duped many more people and having stolen thousands of percent more money.

          Please don’t kill the messenger…
          May all be well here…

          • Mac, thank you for a place to come to and learn a multitude of subjects…
            One never knows what you will see here so, take it all in stride…
            I hope the prepper show this weekend will be good, I will get to see new stuff, but who knows????

            Balance all you do in prepping….

            If you are not prepping, well you are just inepting…

      12. Hope things are A-OK with K Y MOM? Missing you already.

      13. The DOW had its best day in 4 years on Wednesday. It jumped up 620 points!

        The Shanghai just closed 5% upwards! It looks like this thing might be turning around.

        So why all the worry? It’s not like an economic collapse would lead to teotwawki. I think it would take something much more serious for that to happen.

        • What we are seeing is the manipulation effect, and computer run algorithmic trading.

          The computerized buying at high speed has been making tons of money since 2003. I think the average return has been over 8%.

          This manipulation has been pushing millionaires into billionaire status, and at one time the gov wanted to clamp down. In other words, the politicians want their cut, and you can then continue as usual.

          I’m sure it takes a shit load of capital to get all this routing thing set up, but the dividends are astronomical.

          Anyways, there will come a day, not today or tomorrow day; and when that day comes the computer game will not work anymore.

        • As we see all markets showing green numbers today, it is easy to get lulled into some sort of false sense of security that all is well, and there is nothing to worry about.

          The old adage comes to mind…”the calm before the storm”.

          There are too many reasons why the current system and the immorality of the world does not bode well for continued success.
          The turn around will either begin in September or October, and it is not a turn around for the better, or at least not for the short term.
          We can’t get complacent based on what Wall Street does. Preppers are too smart for that, or at least we should be.
          That is not to say we should all just run and hide and wait. We can’t stop it, but we can face it better prepared.

          My suggestion is to take advantage of the drop in gas prices, if you have the time and extra funds, and go places. Take the kids or grand kids on a long weekend somewhere nice, or just to visit relatives in another state.

          We have made plans to take in the coast for a few days (just not the weekend of the 9-11 anniversary). There is something about the salt air and the sea level elevation that can do a body good, especially if you leave out the alcohol and excessive eating. Stay away from the A.Y.C.E. buffets. Especially the seafood ones. They may taste good going down, but any shell fish like oysters,crabs, and shrimp are loaded with toxins. For all the good the lower elevation and the sea therapy, does; people just kill it with lots of toxins and grease, and laying around.

          Take the grand kids on a mountain adventure or hike and enjoy nature. Rejuvenate the mind and body. Then when s does htf, you will be better able to make sound decisions, hopefully.

      14. All market managed funds are BS. Every one of them pays themselves first and will stiff you if the market goes down.

        You will always come out on top, however, if you just do what your grandmother would have done: save more than 10% of your income steadily every month and use it to buy sound things like your home.

        Ignore market pumpers-and-dumpers and today’s equivalent of snake oil salesmen (Cramer etc.).

        Unfortunately, there is always enough people who are greedy and want an easy way to a fortune. This is what hedge funds prey upon.

        A bigger issue is the fact most investment money now on Wall Street comes from big pension funds and the government: as in, the money most people thought was ‘safe’. This is very dangerous because it can bring the whole system down if they fail to spin the wheels fast enough and hypothecate to the ends of the universe.

      15. It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington

        ht tp://www.zerohedge.com/news/2015-08-27/its-official-china-confirms-it-has-begun-liquidating-treasuries-warns-washington

        “On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we’ve documented the PBoC’s liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

        We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China has likely sold somewhere on the order of $100 billion in US Treasurys in the past two weeks alone “

      16. Financial advisors were getting direct kickbacks for selling Mutual Funds and were not informing their clients of this conflict of interest. The direct kickback was stopped about 5 years ago and replaced with vacations ostensibly for training (1 hr day) to expensive exotic vacations.

        Many of these Financial Advisors are crooks in training in a crooked industry run by crooked people. Educate yourself, buy selected investments yourself and watch them like a hawk.

      17. Some guy financial professional on CNBC today said to go ahead and buy now because of some stupid reason.

        Hello ? Can he not even read a simple chart ? the market has broken it’s bull trend. Unless there is a massive rally (which would be happening for the histroical worst month for the market) to near news highs; the trend is now down.

        Now, it wont go straight down like it did monday, but 300 points down and then 200 points up the next couple of days repeating that process for a couple months is definitely possible and likely.

        Anyone buying and holding here is a fool.

      18. dont worry Hitlery has this gun thing all figured out

        Responding to the cold blooded murder of two white tv people on live tv, and videoed by the black gay psycho killer, hillary issued her plan to stop “gun violence”.

        The solution, according to hillary, via a tweet hours after the killing ……………………………….

        Heartbroken and angry. We must act to stop gun violence, and we cannot wait any longer. . -H
        — Hillary Clinton (@HillaryClinton) August 26, 2015

        There ya go folks. We must act to stop gun violence. Who knew? We just needed someone to figure out how to fix the problem, and hillary stepped up. No wonder liberals are so confident that hillary will be the democrat candidate and our next president.

      19. “My accomplishments as Secretary of State? Well, I’m glad you asked! My proudest accomplishment, in which I take the most pride, mostly because of the opposition it faced early on, you know… the remnants of prior situations and mindsets that were too narrowly focused in a manner whereby they may have overlooked the bigger picture and we didn’t do that and I’m proud of that. Very proud. I would say that’s a major accomplishment.”

        – Hillary Clinton 11 March 2014

        • Very, very funny. And the SECOND major accomplishment ??? LMFAO !!! 🙂

      20. This guy knows that hedge funds and mutual funds aren’t the same thing right? The “average person” has no access to hedge funds.

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