The hedge fund industry’s bloodbath continued in 2019 with more hedge funds shutting down than launching for the fifth year in a row.
Some 540 hedge funds had liquidated by the end of October, according to Hedge Fund Research. Meanwhile, the number of funds to have opened last year is projected to fall short of 500 — marking the fewest new funds since 2000, according to HFR data.
The industry’s dwindling size comes as a seemingly endless stock market rally makes it difficult for so-called smart money investors to locate investment opportunities that might justify their high fees.
The average hedge fund this year is up 8.5 percent, a marked improvement from the average 6.7 percent loss they managed in 2018. Unfortunately, the rebound is still short of the S&P 500 index, which was up almost 30 percent this year.
Things are so bleak that normally stoic hedge fund managers are groaning about their woes on the record. “It’s not an easy business and with the increase in compliance and cost … for many people it just isn’t worth it today,” Thomas Thornton, president of Greenwich-based research firm Hedge Fund Telemetry, said in a note published Monday morning.
“That being said I also believe this business is not dead, it just sucks right now,” Thornton moaned in his note.
This year, only a select handful of winners materialized, including:
- Point72 Asset Management’s Steve Cohen, the potential new owner of the New York Mets, had a home run in 2019 with 13 percent returns as of the end of November. His investment wins were overshadowed, however, as news broke in early December that the billionaire was nearing an agreement to become the majority owner of the Mets in a deal that’s widely expected to inject fresh energy — and loads of cash — into the losing team.
- Bill Ackman’s Pershing Square Capital soared more than 50 percent for the year, sources said. That’s a major recovery for Ackman, who was left for dead in the middle of 2018 after a disastrous five-year, $1 billion bet against nutrition company Herbalife. Ackman has credited his fund’s comeback to his new wife, MIT professor Neri Oxman, whom he wed in January.
And 2019 losers include:
- Billionaire Louis Bacon, described by Forbes as a “macro-trading legend,” said in November that his $8.9 billion Moore Capital would return investors’ money in 2020. Bacon, 63, made the announcement after decades of consistently high returns devolved into what he dubbed “disappointing results.”
- Former activist wunderkind Mick McGuire, known for his high-profile battle with Buffalo Wild Wings, closed his Marcato Capital fund last month. Returns had plummeted 90 percent since 2015 on several failed investments, including the bitter and costly proxy battle at Buffalo Wild Wings that ended with McGuire cashing out of the chain with a meager return after the company was sold for less than he predicted.
- Greenlight Capital’s David Einhorn still might eke out a small profit for the year, but his epic battle with brash Silicon Valley billionaire Elon Musk, head of electric-car company Tesla, has been dragging him down. Einhorn has been betting Tesla’s stock will fall — claiming that the cars are less safe than advertised — only to watch shares lock in gains of 24 percent for the year.
- Even Bridgewater’s Ray Dalio — widely considered one of the most successful hedge fund managers of recent years — is limping to the finish line. His main fund is expected to lose money in 2019 for the first time ever as Dalio and his team remain bearish on the still-chugging economy.