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Rekenthaler Report

3 Lessons From Hedge Funds’ Rise and (Partial) Fall

The ups and downs each inform.

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Dog Days
Hedge funds have never looked worse. Their reputation was sullied in 2008, when the average hedge fund dropped half as far as the U.S. stock market and the aggressive ones fared much worse. They then lagged during the recovery, underperforming the average balanced mutual fund for 22 out of 28 calendar quarters. Most recently, many were caught holding  Valeant Pharmaceuticals (VRX).

The result, reports The Wall Street Journal, is that hedge funds face “unprecedented questions about their worth.” (Sorry, the article is firewalled.) Industry stalwart Leon Cooperman called his profession “under assault.” Perhaps more trouble--the world’s second-largest investor in hedge funds, China Investment Corporation, has been “disappointed, to say the least,” and may “slash” its hedge fund allocation.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.