2014 wasn’t a fantastic year for hedge funds with an average return of 3.4%. Dan Loeb was downbeat about his fund’s performance in 2014 as well as prospects for 2015. In an investor letter, as reported by Business Insider, Dan Loeb said 2015 has been characterized by a “haunted house” market, which has seen volatility rise. He noted that 22 of the first 25 trading days have seen moves of over 1%.
Global factors have been largely to blame for the topsy turvy nature of the markets. Greece’s rejection of austerity, instability in Russia and the Middle East, the throwing off of the cap on the Swiss Franc, the decline in the euro and the yen and economic weakness despite falling oil prices have been factors that have created massive intra-day swings.
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Loeb did not omit politically-tinged criticism in his investor letter; as additional problems he cited, “a seeming decline in government respect for the rule of law, shown by numerous executive actions, confiscations of property, and use of various departments — ranging from the IRS to the Treasury– to intimidate citizens and interfere with local commerce.” In addition, Loeb called out the present administration in his letter for a “surprising lack of leadership on the international stage by the United States and an apparent unwillingness to take decisive action to promote democracy abroad.”
Loeb’s fund returned 5.7%, which he said was a “mediocre” performance, but was higher than the average. He blames the fact that the fund overstayed its welcome in certain declining stocks and should have taken advantage of declines in quality stocks.