Swedroe: Hedge Funds Continue To Fail

July 20, 2015

The first half of 2015 again brought hedge funds little in the way of relief from their historically poor performance.

Hedge funds entered 2015 coming off their sixth-straight year of trailing U.S. stocks by significant margins. And for the 10-year period from 2005 through 2014—which includes the worst bear market in the post-Depression era—the HFRX Global Hedge Fund Index returned just 0.7 percent per year, underperforming every single major equity and bond asset class.

The table below shows the returns of the HFRX Global Hedge Fund Index for the first six months of 2015, as well as the 10-year period from 2005 through 2014. It also shows returns for major equity asset classes and one-, five- and 20-year Treasurys. 


  Year-to-Date Return
(%) January-June 2015
Annualized Return (%)
2005-2014
HFRX Global Hedge Fund Index 1.3 0.7
     
Domestic Indexes    
S&P 500 Index 1.2 7.7
MSCI U.S. Small Cap 1750 Index (gross dividends) 4.4 9.0
MSCI U.S. Prime Market Value Index (gross dividends) -0.9 7.2
MSCI U.S. Small Cap Value Index (gross dividends) 1.0 7.9
Dow Jones U.S. Select REIT Index -5.8 8.1
     
International Indexes    
MSCI EAFE Index (net dividends) 5.5 4.4
MSCI EAFE Small Cap Index (net dividends) 10.1 6.0
MSCI EAFE Small Value Index (net dividends) 8.7 6.4
MSCI EAFE Value Index (net dividends) 4.1 3.9
MSCI Emerging Markets Index (net dividends) 2.9 8.4
     
Fixed Income    
Bank of America Merrill Lynch One-Year Treasury Note Index 0.2 2.0
Five-Year U.S. Treasury Notes 2.6 4.5
20-Year U.S. Treasury Bonds  -4.0 7.5

 

In the first six months of 2015, the HFRX Global Hedge Find Index returned 1.3 percent. Of the 10 major equity asset classes, it outperformed just four. As is our practice, we’ll compare that return with the performance of three standard 60 percent stock and 40 percent bond portfolios.

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