Hedge Fund Performance Versus Expectations

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Jan. 31 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, discusses the performance of hedge funds on Bloomberg Television's "Money Makers." (Source: Bloomberg)

Average hedge fund performance, right?

If you are in one making more than 20% a year, you are satisfied with your results.

If not, you are unsatisfied.

It depends what your investment is attempting to do.

A lot of instant -- institutional investors are buying into specific strategies.

They do not know what the market is going to do and they want to be prepared for any kind of environment.

What these results show you, contrary to what a lot of people in the media keeps saying, is that the institutional investors are quite happy with their hedge fund investments, which is no doubt why we keep hitting new highs.

Implicated, implicated.

Most stories written do compare a basket of hedge funds, all different sizes and strategies, usually to the s&p 500. it is ridiculous.

The best thing to do is ask the investors in these funds, are they happy are not happy.

We have the answer on the screen there.

The dark and medium green are happy or very happy.

The light green is disappointed.

Last year, essentially three quarters in 2013 were happy with their hedge funds investment.

Which is a great point.

For a lot of these institutional investors, it is about preservation, protecting downside risk, and it's more important for them to protect against downside risk than hit it out of the park.

That's right.

If the market feels fully valued, and want to be in something like an event driven strategy which has an opportunity to make money even if the overall market does not rise too much.

That is why there are so many different styles.

We have a chart that shows satisfaction by style last year, which is interesting because it helps you understand and break down where the various strategies are and how they did.

Over there on the left you have equity, long short.

Long short return something approximately 20% last year on average.

The market was up approximately 30%. it is not a failure if you are saying, the rest of the differential was in insurance premium against the market dropping.

I'm happy to pay that premium, especially if i'm getting a 20% upside.

All the way at the other end -- we can big back -- bring it back.

People were dissatisfied with their managed futures.

That is not unexpected, that they would be dissatisfied.

A lot of those programs promise "alpha" and have not been able to deliver.

You get unsatisfied investors.

If you promise downside protection with upside participation like the long short guys and deliver that, they are happy.

It's all about meeting expectations.

As anything else stick out to you in these charts?

You are getting much more sophisticated understanding of what hedge funds are attempting to do.

In the old days, everyone was alpha, alpha.

People have become much more sophisticated.

That is showing up in their satisfaction levels.

Bob rice, from tangent capital partners, thank you.

It is almost 26 minutes past the

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