Matt Levine, Columnist

Hedge-Fund Gloom and LBO Memories

Also banking troubles, algorithm wars, accounting errors, Martin Shkreli, and somehow still more Davos.

January 21, 2016 at 1:43 PM UTC

Corrected

January 21, 2016 at 1:49 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Hedge funds.

I know that benchmarking all hedge funds to broad equity indexes is dumb, but I am nonetheless going to throw it out there that if you are invested in a hedge fund that has returned zero percent year-to-date, you should be pretty satisfied. The S&P 500 is down about 9 percent so far in 2016, so that's 9 percentage points of pure alpha. (I mean, it's not, not at all, but you know what I mean.) One way to generate returns of zero percent is to do literally nothing, and here is an article sort of about that, though it is really about how "a number of hedge-fund managers are playing defense" by holding a lot of cash and generally looking busy while not buying stuff. "Everybody likes buying a bargain, but catching a falling knife is no fun at all," says one of them.