If long-short equity managers can’t beat the market, what purpose do they serve? That’s a question investors are rightfully asking after 2008, when so many such managers were buried. Even the Tiger cubs, offspring of Julian Robertson Jr.’s famed Tiger Management Corp. and purported masters of the art, had a rough time of it — although most did better than cub Stephen Mandel Jr., whose Lone Cypress fund was down 32.56 percent.
Long-short equity, by far the biggest category of hedge fund in terms of sheer number of funds, actually fared relatively well: Hedge Fund Research’s HFRI equity hedge index was down 26.16 percent on the year, compared with the 37 percent drop in the Standard & Poor’s 500 index. "Relatively well" isn’t enough, however. Investors would’ve done better last year going whole hog into cash.
A sinking market wasn’t the only hazard...