Return
|
S&P1
|
Difference
|
HFRX2
|
Difference
|
|
2009
|
50.92%
|
26.46%
|
24.46%
|
13.40%
|
37.52%
|
2010
|
18.83%
|
15.06%
|
3.77%
|
5.19%
|
13.64%
|
2011
|
2.28%
|
2.05%
|
0.23%
|
-8.88%
|
11.16%
|
2012
|
16.41%
|
16.00%
|
0.41%
|
3.51%
|
12.90%
|
CAGR3
|
17.06%
|
14.56%
|
2.50%
|
2.99%
|
14.07%
|
And here is how $100,000 would have compounded versus those two benchmarks if it was invested at the end of 2008:
Compared to the hedge fund universe at large (HFRX), we have done well. But compared with the S&P, we have done just okay.
As erstwhile Buffett lieutenant David Sokol once said, I am pleased but not satisfied. With the exception of 2009, our investments have tracked the S&P 500 very closely. In fact, one might draw the conclusion that I am “index hugging”. To value investors, including myself, that is a pejorative. So while I am pleased we have not had a down year (yet) and I am pleased we have outperformed the S&P (if only by a slim margin these past few years), I am not satisfied. My goal is to outperform by a bigger margin.
***
_____________________________
1This is the total return of the S&P 500, including if dividends were reinvested.
2The specific index here is the HFRX Global Hedge Fund Index, widely used index to praise or pan hedge funds in the press.
3CAGR = Compound Annual Growth Rate. Note that our 17.06% return is actually an IRR (explained in footnote 4) from 2009-2012 rather than a simple CAGR, which would have been a more inflated 20.88%.
