Soros Says Hedge Funds Can’t Beat Market Because of Fees

Soros Says Hedge Funds Can’t Outperform Market Because of Fees
“Outperforming the market with low volatility on a consistent basis is an impossibility,” said Soros. “I outperformed the market for 30-odd years, but not with low volatility.” Photographer: Chris Ratcliffe/Bloomberg

Jan. 25 (Bloomberg) -- George Soros, the billionaire philanthropist and former hedge-fund manager, said institutions that invest in the industry should expect poor performance, in part because managers charge high fees.

“Since hedge funds are now a dominant force in the market, they can’t, as a group, outperform the market,” Soros said today in a Bloomberg Television interview with Erik Schatzker from the World Economic Forum in Davos, Switzerland. The funds’ fees, typically 2 percent of assets and 20 percent of returns, eat into profits, Soros said.

Soros’s hedge fund operated until 2011, when he turned New York-based Soros Fund Management LLC into a family office that now oversees $24 billion. He averaged returns of about 20 percent a year since 1969 at the firm and its predecessor.

Hedge-fund performance will also be impeded because managers and investors are reluctant to take risks, Soros said.

“Outperforming the market with low volatility on a consistent basis is an impossibility,” said Soros, 82. “I outperformed the market for 30-odd years, but not with low volatility.”

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net