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Nir Kaissar

Hedge Funds Didn’t Invent Special Sauce in 2020

It didn’t take any exceptional wisdom to pile into highflying technology stocks and beat the S&P 500.

It wasn’t rocket science.

It wasn’t rocket science.

Photographer: Hoare/Hulton Archive/Getty Images

Just wait until the next stock market meltdown. Then you’ll see the value of a seasoned stock picker.

That was the refrain from equity hedge fund managers between the 2008 financial crisis and the arrival of Covid-19, the second-longest stretch without a bear market on record. The S&P 500 Index quintupled in value during that period, and stock pickers struggled to keep up, particularly long-short hedge funds that simultaneously bet on some stocks (long) and against others (short). When a rising market lifts all stocks, long-short managers have little hope of winning.