A recent article in Seeking Alpha focused on the traditional role of some of Wall Street’s biggest players: hedge funds.

In the six-year bull market that has taken the S&P 500 to new all-time highs, there has been little need for hedging or protection from a weak stock market. However, a large part of what hedge funds are meant to do is protect investors from market risk via selectively short-selling stocks.

Underperformance

According to Goldman Sachs, hedge funds have now underperformed the S&P 500 for six consecutive years.

One contributing factor to the underperformance has likely been the short positions that the funds have held during that time. Although there have certainly been some big losers in the past six years, shorting stocks has largely been a losing game.

Poor Environment For Shorting

The Federal Reserve’s quantitative easing policies and historically low interest rates have provided…

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