If You Are A Hedge Fund You Should Be Making Money Now

As I've mentioned before, there is a lot of pain in this market right now. All broad market indices are down signficantly for the year. Most mutual funds are showing big losses. And now many hedge funds are being forced to liquidate positions and "unwind" as investors redeem capital.

If you are a hedge fund, you should be thriving in this environment. If you are mutual fund disguised as a hedge fund then you are not thriving. If you are a value fund and are buying shares while they are cheap only to see them go lower then you are not a hedge fund. You are an investment fund that does not hedge. The whole point of a hedge fund is to "hedge" or curb your bets so that you control risk. If you are suffering big losses then you are not hedged and you really are not a hedge fund. This is the type of market in which the real hedge funds show their attributes.

There are plenty of rumors going on in the HF world about turtle traders being let go by SAC and other firms because they cannot produce. While I do not like to see people lose their jobs, the one thing that I like about the HF industry and in particular the turtle model is that if you do not produce you are let go. If you do not produce it means that you are losing big. If you are losing big it means that you are not adequately hedged and so you should not be in the hedge fund business.