Why are Huge Hedge Funds Making Millions in Management Fees While Investors are Losing Money?

CASTLE ROCK, Colo. - April 21, 2016 - PRLog -- The traditional reason for investing in hedge funds is a risk mitigation strategy to protect against sudden, substantial, market corrections. Unfortunately, for large hedge funds this original concept morphed into something entirely different. Recently, major hedge funds are seeing losses that correlate with market reversals. This is especially true with the largest hedge funds. Investing in such funds, offers investors little protection against market downturns. The fund managers of the largest hedge funds are making millions in management fees in a down market, while their investors are losing money.

This problem, as reported by Bloomberg, was the motivation behind investors withdrawing record amounts from major hedge funds in the first quarter of 2016.

Chicago-based Hedge Fund Research Inc. (HFR) noted that investors withdrew a total of 15 billion dollars from hedge funds in the first quarter of 2016. This reduced the total amount of assets under hedge fund management from 2.9 trillion to 2.86 trillion dollars. The last time that saw such huge withdrawals happened was in 2009 when investors withdrew 43 billion dollars.

Bloomberg also reported that the average return for hedge funds, since HFR created the hedge fund index in 1990, declined steadily from the high of 25% in February 2000 to the low of 2.6% in February 2016. The index of HFRI posted an 18.3% annual return from 1990 to 1999, when the technology sector was booming. However, from 2000 to 2015 the returns dropped to around 3.4% each year. In the first quarter of 2016, the average for all hedge funds was a loss of 3.13%. There are simply not enough strong investment returns to support a 2.9 trillion dollar industry.

The hedge funds with top managers, such as Bill Ackman, Chase Coleman, Ray Dalio, Daniel Loeb, Andreas Halvorsen, John Paulson, and Barry Rosenstein, all showed losses in the first quarter of 2016. This occurred while the global stock market average showed a little gain, when including the reinvestment of stock dividends.

Here are some examples of the losing hedge funds:

Hedge Fund First Quarter 2016 Returns

   Third Point Partners -4.8%

   Pure Alpha Fund -6.7%

   Jana Partners Fund -7.3%

   Jana Nirvana Fund -10.9%

   Citadel Fund -8.0%

   Viking Global -8.8%

   Advantage Fund and Advantage Plus Fund -15.0%

   Senfina Fund -17.0%

   Pershing Square Capital Management -25.6%

In a volatile market, how does Sacro Capital Group compare with its peers?

Sacro Capital Group is up 22% in the first quarter of 2016 and 44% over the past twelve months.

CEO and Chairman, Jonas Brown of Sacro Capital Group attributes the poor performance of the largest hedge funds to the difficulty in achieving high returns with billions under management. Some of the positions held by these mega funds are so large, that trying to exit the investment, due to a downturn, causes an additional market collapse, with the prices falling rapidly and considerably, resulting in losses to the fund.

Jonas Brown says, "Sacro Capital Group is different. We limit the total assets under management to 100 million and once we reach that limit, we will not allow anyone else in. We like to keep our fund small, because the larger it becomes the more diluted the returns get and the more chances the fund has to take"  At Sacro Capital Group, we run a lean ship.  meaning, we don't have a lot of expenses the big funds have.  We don't have fancy, high priced offices, nor do we drive around in 200,000 cars that are expensed to the business.  We are a grounded group who does our job well.

The reason these 10, 50, and 100 billion dollar funds exist, is purely out of greed. Those hedge funds are making tons of money even in a down market on the 1-2% management fees. While at Sacro Capital Group if we are down, we don't charge the management fee. This is how it should be, not like the other funds that take management fees even in a down market. They are still making hundreds of millions of dollars and spending it on lavish offices and high payroll and yet their funds have negative returns. One would not be able to complain if the returns were rock solid, but they are not. People are losing alot of money with these large hedge funds and paying 1-2% for it.

Brown goes on to say, "Getting high returns is easier when investing a few million dollars versus a few billion. If you think about the number, which is easier to obtain? 22% on 10 million dollars, which is 2.2 million versus 22% on 10 billion dollars, which is 2.2 billion. Mega hedge funds have to buy and hold and are seeking every day places to put the money to make it work for them. Because our firm is limited by what we take in from investors, we are very cautious about what we invest in; therefore we maximize our investors' returns and limit what, when and how we invest."

Sacro Capital Group announced today, it will open its hedge fund investment opportunity for a few accredited investors. Sacro Capital Group is a hedge fund that limits the total assets under management to 100 million. Once the limit is reached, no further investors are accepted, unless an existing investor withdraws from the fund.

Contact Sacro Capital Group today for more information.

Sacro Capital Group is located in Castle Rock, Colorado.

Telephone: +1 720-504-1000

Website: sacrocapital.com

Contact form: Contact sacrocapital.com

Email: info@sacrocapital.com

Address: 3740 Dacoro Lane #200, Castle Rock, CO 80109 USA