As Pimco plans on marketing a hedge fund-like product to retail investors, would it be a good investment for retail? Anthony Scaramucci of SkyBridge Capital discusses.
Hedge funds are now going after the retail investor. But should retail investors take on the risk?
If there’s one thing most hedge funds don’t like to admit, it’s that grandma is a better investor than a room full of seven-figure salaried MBAs.
That’s not a joke. The Credit Suisse Hedge Fund Index for the first half of 2013 shows that that hedge funds had an average year-to-date return of 4.56%. Meanwhile, the benchmark S&P 500 index had a year-to-date return of 19.62%. And the month of July showed hedge funds were still beat by the S&P 500; while the market was up nearly 4.95%, the Credit Suisse index was up 0.88%.
Last year was no better for the index compared to the market average, either. The Credit Suisse index brought home a 7.67% return versus the S&P 500’s 13.41%. When it comes to the markets, hedge funds are generally outwitted by conservative investors who hold on to an index fund based on the S&P 500.
The largest bond fund in the world is the Pimco Total Return Fund. However, Pimco saw $41 billion withdrawn from it since the start of May. Year to date, the fund is down 4%.
Pimco now wants to sell hedge fund-like assets to retail investors. And, of course some hedge funds have spectacularly outperformed the index year after year. But, those are few and far between.
So, are hedge-fund like products the right move for the retail investor?
Talking numbers with Talking Numbers is one of the people most in touch with what hedge funds are doing. Anthony Scaramucci is the founder and a co-managing partner of SkyBridge Capital, an $8.3 billion alternative asset firm. SkyBridge Capital also hosts the annual SALT conference, one of the world’s largest gatherings of hedge funds.