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By Tyler Durden

Exactly

… since then things have gone from terrible to absolutely abysmal, and as of this moment the GSTHHVIP index which tracks the performance of these “most popular” among hedge fund stocks, has never been lower despite the dramatic rebound in the broad market!

So yes, anyone who shorted this index one month ago as we suggested, has made money. Unfortunately for Goldman’s hedge fund clients, the “basket” is still not available in ETF format, which means hedge funds are forced to pass these hot potato stocks among each other.

It also explains why while the most popular hedge fund stock basket has never done worse, its alternative, the least concentrated basket of stocks has never done better.

In other words, and as we also said last time around, the only winning trade is to do precisely the opposite of what the hedge funds are doing, none of whom have any clue as to what is going in this market anymore.

For those curious which stocks make up Goldman’s “hedge fund VIP basket”, so they can avoid them of course, here they are again.

Unfortunately for hedge funds it is too late to unwind exposure at this point, which is why despite the market rebounding to just modestly green on the year, most hedge funds remain deep in the red, because as Kostin puts it “the violent factor reversals have offset most efforts to generate alpha.” More:

Mutual funds and hedge funds have faced a difficult start to the year. High return dispersion is typically associated with increased stock-picking opportunities but the violent factor reversals have offset most efforts to generate alpha. Large-cap core mutual funds and hedge funds have lagged the S&P 500 YTD by 90 bp and 280 bp, respectively. 32% of large core funds has outpaced the S&P 500 YTD, close to the 10-year average of 33%. Large-cap growth funds have fared the worst with only 9% of funds beating the Russell 1000 Growth index so far in 2016.

Unfavorable stock selection has also hurt fund performance. Our basket the most popular hedge fund positions (GSTHHVIP) has lagged our very important short position basket (GSTHVISP) by 700 bp YTD (-5% vs. 2%). Similarly, our mutual fund overweights basket (GSTHMFOW) has trailed mutual fund underweights (GSTHMFUW) by 820 bp (-5% vs. 4%).

Mutual funds and hedge funds favor high growth, consumer-facing technology stocks such as Facebook (FB) and Alphabet (GOOGL). Eleven stocks appear in both our mutual fund overweights and popular hedge fund positions baskets. The median return of the 11 stocks was 19% during 2015 compared with -10% YTD. The median stock has higher expected 2016 sales growth (16% vs. 3%) and EPS growth (17% vs. 6%) vs. the market but a higher valuation (forward P/E of 19x vs. 17x for S&P …read more

Source: "Nobody Is Making Money" – Hedge Fund "VIP Basket" Obliterated, Plunges To Record Low

    

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Posted March 19th, 2016 in Uncategorized.