On whether he sees the hedge fund industry as a group of top performers and everyone else or whether he bundles performance together:
“I don’t think you can bundle everyone together. But I do think one of the things that’s affected hedge fund performance over the last, well, really since it started really getting big around the ’80s, is the increase in size of hedge funds. It was so much easier to compete with Bank Trust departments, with individual investors, with mutual funds than it is with other hedge funds. And I think the success of hedge funds in general has probably hurt the performance of individual hedge funds…Because the competition is tougher.”
On the hedge fund industry’s overall performance:
“Hedge funds do better than the markets in bad markets because they are hedge funds. And the, the ideal for hedge fund is a vigorous active market that doesn’t move a whole lot. There they can make it in both the long and short basis….In ’07, hedge funds, I know ours, just blew it out….It was just unbelievable. And then in ’08, we lost, you know much of that.”
Lots of interesting thoughts there. The first thought basically touches on Michael Maubboussin’s idea of luck and skill and how more skill in an industry increases the necessary amount of luck required to thrive. Robertson also discusses how the size of the industry is generally hurting overall performance and making it harder to find good funds. As I’ve said before, this is starting to look more and more like the mutual fund industry in terms of broadly negative performance trends.
See the full interview here.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.