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No. of Recommendations: 4
In fairness to the long/short hedge funds, it is somewhat expected to trail the market in big up years with the expectation of outperforming in down years with the net effect being outperformance over a full bull/bear market cycle. They have a heavy burden to carry with the typical 2 & 20 model and most will fail to beat the index over time in my opinion but a select few have in the past and that includes Tilson, Einhorn and others. The counterpoint is why bother with the long/short hedge fund model when you can buy Berkshire, for example, at a cheap price. Or other long positions at cheap prices that are not necessarily correlated with the market. If hedge funds are going to have trouble beating the S&P 500 over the next 5 years, they will have an even harder time beating Berkshire itself. The problem is one cannot charge a 2 & 20 fee and put clients into long term passive holdings like Berkshire.
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