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Active Fund Managers Nearing Capitulation?


A recent article at ZeroHedge admitted some very astonishing things.  The article quotes from a recent fund newsletter written by Russell Clark.  In case you do not know Mr. Clark is the manager for the hedge fund Horseman Global.  Mr. Clark’s track record at the helm of this fund is rather impressive.  It would have to be impressive to help the fund grow to $1 billion+ under advisement.  Here are a couple of quotes from the letter:

1) So after 8 months of hard work in 2016, with a few wins and a few losses, here we are with a fund that has basically gone nowhere. This is a sorry state of affairs that has been repeated not only at hedge  funds, but for most active fund managers. Why should investors bother giving their hard earned cash to active managers, with their higher fees and poor performance. This is a view that is gaining more and more traction in the industry. Active fund management, with hedge funds by definition being the most active, has become an area to be avoided… However from 2009 onwards, active fund management has been going through a prolonged period of underperformance.

You read it straight from an insider, a well respected insider.  Place that next to the current mantra from many wall street worshipers that say actively managed funds are the place to be.

2) One of the curious features about long periods of outperformance of one style or another is that ultimately everyone is forced in. Sometimes this happens through capitulation by previously skeptical investors, or sometimes it happens through pure greed as fear of missing out takes over. The big question is, how close are we to that moment? I think we are indeed getting close. Goldman Sachs data on hedge funds show that top 10 positions for average hedge funds make up 70% of long positions.

My interpretation of this last quote?  We are nearing the point where all the bear market people capitulate or simply get greedy or fearful of missing out and go long on the market.  This is a rather certain signal that things are soon to turn around.  Why else is Mr. Russell interested in determining when that moment will be?  You got it, if he knew he could capitalize on it.  Bottom line, he sees it coming, but has no idea when it will arrive.

Just food for thought but here are a few question for you; Do you think there will be another economic downturn like 2008-2009?  Do you want to have happen this time what happened that time?  Why are you using the same strategies you already know do not work?

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