Plain-vanilla bonds and widow-and-orphan utilities creamed hedge funds in 2011, offering fresh evidence that ordinary investors need not feel underprivileged for lack of access to more exclusive investment opportunities.
In a news release culling hedge fund data for 2011, Hennessee Group, which advises hedge fund investors, turned in a rather shameful report card for the funds, which target high-net-worth investors.
As a group, hedge funds experienced their worst year since 2008, losing 4.27% compared to a flat S&P 500 and a Dow advance of 5.52%, In contrast, categories favored by safety-conscious investors represented by the S&P/BG Cantor 7-10 Year Treasury Bond Index and the S&P North American Utilities Sector Index surged a 15.60% and 14.83%, respectively; conservative investments such as consumer staples and gold also outperformed.
Hennessee Group co-founder Charles Gradante suggests ordinary investors were not alone in the fear they felt over the markets' high turbulence. "Hedge fund managers describe 2011 as 'more frustrating than 2008,' " he said. "High levels of uncertainty and the highest daily average volatility in 50 years resulted in managers getting 'whipsawed.'"
The Hennessee release adds that "managers entered the fourth quarter with low exposure levels in an effort to protect capital and were caught off guard by the double digit rally in equity markets."
