Barclays has estimated hedge fund investor returns to be between 10% and 11% in 2024, primarily based on a weighted common throughout investor sorts, together with pension funds, household workplaces, and personal banks. This efficiency aligns with Hedge Fund Analysis’s weighted composite index, which additionally rose 10% final 12 months.
Nevertheless, a standard 60/40 portfolio, consisting of 60% shares and 40% bonds, would have outperformed hedge funds throughout the identical interval. In accordance with the Lazy Portfolio ETF web site, such a portfolio—utilizing the Vanguard Complete Inventory Market ETF (VTI) and Vanguard Complete Bond Market ETF (BND)—would have delivered just below 15% in 2024.
Even over the previous 5 years, together with the difficult 2022 market when each shares and bonds declined, the 60/40 technique posted a median achieve of 8%, in comparison with simply over 7% for hedge funds, which misplaced 4% in 2022.
“The truth that a standard 60/40 portfolio outperformed the common hedge fund in 2024 highlights an ongoing problem for the trade: justifying its value,” stated Bruno Schneller, managing companion at Erlen Capital Administration, a Swiss asset supervisor.
Schneller famous that whereas hedge funds market themselves as instruments for diversification, draw back safety, and alpha era, their latest efficiency suggests they could battle to constantly ship on these guarantees, significantly in low-volatility environments.
He emphasised the significance of buyers rigorously contemplating whether or not the potential advantages—comparable to entry to specialised methods or uncorrelated returns—are well worth the usually greater prices in comparison with less complicated, cheaper alternate options.