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So far this year, hedge fund managers have failed to beat the S & P 500 , one of the cheapest, easily available investment vehicles for ordinary investors. Hedge funds returned just 5% in the first half of the year after a 0.2% loss in June, with event-driven strategies the biggest laggards, according to data firm HFR. In comparison, the S & P 500 climbed 15% through June this year, marking one of its best first halfs. “With the first half of 2024 coming to a close, hedge funds across most strategies continue to show gains in the mid-to-high single-digits,” Morgan Stanley’s team including Bill Meany wrote in a July 1 note to clients. “The last six to eight weeks have been more challenging from an alpha perspective.” Americas-based long-short hedge funds gained just 40 basis points in June, implying that they only captured 10% of the upside relative to their benchmark S & P 500, according to Morgan Stanley. A basis point equals one one-hundredth of a percent (0.01%). The performance may come as a disappointment as hedge funds often tout star stock pickers and niche strategies to justify their high fees. Hedge funds typically charge a 2% management fee on the total assets under management plus a performance fee of 20% of the fund’s profits. Goldman Sachs’ prime brokerage data showed hedge funds have been rotating out of tech stocks, especially winning chipmakers over the past few weeks, while pouring into financial stocks and commodities. Wall Street’s big names Ken Griffin’s flagship multi-strategy Wellington fund at Citadel returned 8.1% in the first half of the year, according to a person familiar with its returns, who declined to be identified because the information is private. Its tactical trading fund, which combines fundamental equity and quantitative equity strategies, gained 13.7%, the person said. Citadel declined to comment. Bill Ackman’s Pershing Square reported net performance of 5.7% through June 30. Dan Loeb’s Third Point posted an 11.6% rate of return in the first half of 2024. Cliff Asness’ AQR fared better. Its multi-strategy Apex fund that includes stock-picking, macro and arbitrage strategies gained 13.5% through the end of June, net of fees, according to a source familiar with the firm’s performance, who declined to be identified because the information is private. The AQR Delphi Long-Short Equity Strategy, which invests long in lower-risk, higher-quality stocks and invests short in higher-risk, lower-quality stocks, rallied 16.3% net of fees, the person said. AQR also declined to comment.
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