Fund performance

There’s a lot to complain about these days, from the effectiveness of the government’s $3 trillion stimulus package to unlimited quantitative easing.

Analysis of their performance — and fees — may reveal some surprises.

With the industry facing ridicule for high fees and low returns, clients have pulled a net $33 billion from the industry in the first quarter, the most over a decade.

Dubbed Disco III, the fund will target leveraged loans, high-yield bonds and collateralized loan obligations.

Some of the industry’s largest names took a hit in last month’s market tumult, including funds run by Ray Dalio, Michael Hintze and Adam Levinson.

The holdings in these top-performers “are companies that will be replaced, from a performance standpoint, over the next decade,” an expert says.

Analysis of two funds in particular shows how important the industry has become to the oil futures markets, as they have attracted record inflows.

Total net assets in Michael Hasenstab's Templeton Global Bond Fund slumped to $22.6 billion as of March 31, public filings show.

“These funds got an assist from the Fed when they were told they would backstop the higher end of the high-yield credit industry,” an expert says.

The setback for the hedge fund, which slid as much as 14% in the first quarter, is another example of the turmoil wrought by the coronavirus.

The firm expects a second wave of opportunities, particularly in commercial mortgage-backed securities and collateralized loan obligations.

The poor showing may lead investors to question why they’re paying some of the highest fees in the money management industry.

CEO Larry Fink announced a new focus on ESG in January, however the coronavirus has pushed a separate set of urgent issues into the forefront.

“People are just saying, ‘Why should I pay for an active manager when most of them lose to the benchmark anyway?’ This is a big deal,” an expert says.

“I do believe that clients sometimes get too caught up in expense ratios,” an expert says.

“This market environment is a very good one for investors to do a self-awareness check,” an expert says.

Instead, the billionaire opted for a lucrative credit hedge that earned his firm about $2.6 billion in profits when the market plummeted.

“Ideally, you would like clients to try not to make really short-term decisions, however this is an unprecedented situation,” an expert says.

Flagship funds at Ken Griffin's firm had been down 5.3% through March 20 before things turned around.

The funds are also some of the lowest-duration products in the market.