Despite the seventh consecutive month of gains for the broad hedge fund universe, calls for increased compensation have largely fallen on deaf ears as growth in AUM slows to the weakest since the financial crisis. However, as WSJ reports, Point72’s Steven Cohen is boosting the bonuses for top traders at his ‘family’ fund. There’s just one catch – they have to beat the market!
While this seems like a fair demand, this could be a big problem, as BofA notes, active managers are now more exposed to beta than they have been since 2008.
In other words, instead of taking “active” advantage of stock dispersion and alpha generation, all the “smart money” is doing, is simply adding leverage to broader market surrogates, and doing what every other investor at home can do for free: ride the S&P500.
This post was published at Zero Hedge on Oct 12, 2016.