Howard and Odey Show Ups and Downs of Hedge Funds

More than a third of 185 family offices surveyed by BlackRock Inc. plan to hand more capital to hedge funds after the pandemic roiled the global economy, according to a report published this week. The problem the affluent face, though, is deciding which manager will build their wealth. The rollercoaster nature of returns makes the choice more akin to picking black or red on a roulette wheel than pursuing an informed asset allocation strategy.

Last year was a perfect opportunity for market wizards to prove their alleged magical powers of securities selection. The Covid-19 virus trashed stock markets and sent credit spreads soaring in March, only for the pause in the bull market to prove temporary. But the disparity of hedge fund returns shows it’s impossible to tell in advance which firm will deliver outperformance, never mind the futility of predicting which way markets are headed.