Is This The End For Hedge Funds: Retail Investors Outperform “Smart Money” Ten-To-One

After a dis­mal decade for hedge funds, 2020 was the year that may have sealed the fate of the (for­mer) mas­ters of the uni­verse who once upon a time col­lect­ed 2 and 20 to hedge against crash­es and to out­per­form the mar­ket but now mere­ly col­lect tens of mil­lion in fees to come up cre­ative excus­es for sucking.

Case in point: at the start of the year, the so-called “smart mon­ey” was mas­sive­ly long the same hand­ful of stocks, only to watch mor­ti­fied as their port­fo­lios explod­ed in March with hedge funds for­get­ting to actu­al­ly “hedge”, and get­ting swept away with the mar­ket car­nage. Then just as every­one flipped short in late March, the Fed launched the most bat­shit insane res­cue of cap­i­tal mar­kets, which includ­ed inject­ing tril­lions in liq­uid­i­ty every sin­gle day and even buy­ing junk bonds. Need­less the say, the mar­ket ripped just as the hedge fund crew was short, lead­ing to even more loss­es. Then around Sep­tem­ber, when hedge funds were doing what they do best — all jump­ing into the same hand­ful of stocks — the rug was pulled from under them as the Nas­daq tum­bled, quick­ly accu­mu­lat­ing even more loss­es, and then, just two months lat­er, the last nail in the cof­fin was ham­mered when momen­tum stocks — a peren­ni­al dar­ling of those who sup­pos­ed­ly col­lect mil­lions to con­duct in depth and exten­sive fun­da­men­tal analy­sis but mere­ly copy­cat each oth­er’s trades — suf­fered a 15 sig­ma crash, oblit­er­at­ing what lit­tle alpha hedge funds had gen­er­at­ed in 2020.

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