It is finally time to say adieu to listed hedge fund BlueCrest BlueTrend, which has just tabled proposals to wind up as its market cap has slumped below $100m.
When it first launched, I liked the look of this mainstream, rather liquid way of accessing hedge fund CTA magic, but BlueTrend and its trend-following strategies failed to impress.
It has not been the only hedge fund to shut up shop on the London market. The listed hedge fund sector is in decline (although Bill Ackman's US based-Pershing Square did manage to pull off a mega IPO last year).
Most hedge funds seem to have given up on the idea of getting a listing and appear to be focusing instead on building liquid alternative vehicles framed around a UCITS structure.
Hedge funds have not had a great following post the global financial crisis. According to numbers from Numis, 2015 has been another stinker with most strategies down in the nine months to 30 September; a period during which the MSCI World declined 5.6% in dollar terms.
Numis also reports equity-related strategies, in particular, have had a difficult time with the HFRI Event Driven and HFRI Equity Hedge down 3.2% and 2.2% respectively.
This damage can be seen in numbers from the large high profile funds, with Pershing Square and Third Point down 9.3% and 5.3%, respectively (based on their latest NAVs).
Some listed hedge funds have turned in a decent set of numbers, including BlueCrest AllBlue (a larger companion fund to BlueTrend) which is up 1.8%, but even London goliaths BH Macro and Global are down by a small amount.
Fee pressure
Unsurprisingly, pressure is intensifying on fees, with the old two-and-twenty structure a very distant memory for most managers.
According to Eurekahedge, the level of performance fees charged by new hedge funds has fallen from 17.1% in 2014 to 14.7% in the first half of 2015, with long/short equity funds facing the greatest fee pressure.
There are plenty of theories for what has gone wrong with these performance numbers. It seems the hedge fund masters of the universe are as bad as the rest of us at predicting what central bankers might do next.
They have also struggled with the increasing correlation of assets, and trend followers seem to be complaining about too much of the wrong kind of volatility about.
Maybe all those puzzling market anomalies waiting to be exploited have disappeared from view under the gaze of thousands of active hedge fund observers?
The 25 richest hedge fund managers
But for this contrarian, there is a rather more plausible explanation. Hedge funds should stop trying to be multi-strategy pseudo asset managers.
Hedge funds should be about either great trading acumen in very focused markets, or brilliantly complex quant driven expertise deployed with massive leverage to accentuate small market anomalies.
The idea that a coterie of hugely overpaid, ego driven, and highly intelligent traders can continue to mingle together happily in a huge firm is a joke.
As soon as one star shines, they shoot off, leaving the poor old investors to pay over the odds for the long tail of frankly second-rate hedge fund maestros.
Tipping point
We have come to what I think is an important moment, nay a tipping point.
For too long wealth advisers have automatically assumed they need some exposure to hedge funds as a matter of course.
I would argue that whole business model is finished. We need to go back to the days when investors only ever dabbled sparingly in a few unconventional hedge funds that offered something fresh and different.
Advisers need to realise the whole hedge fund distinction is a sham. With a few honourable exceptions, they are just ordinary asset managers, using lashings of leverage and a bit more technology to help justify expensive key staff.
Ditch the whole model, force the industry into a massive bout of creative destruction, and then quietly watch the re-emergence of genuinely exciting managers who should only ever get paid a performance fee.
David Stevenson is an FT columnist, editor at Portfolio Review, and consultant
