Hindsight Capital’s Decade of Wins

A recent article in Bloomberg chronicles the past decade’s track record of a “mythical” hedge fund called Hindsight Capital LLC with a tongue-in-cheek account of its wildly successful trades.

The article begins with an account of the “simple truths” grasped by Hindsight’s managers at the start of 2010:

  • That the global economy would suffer “shock” so severe that inflation wouldn’t return.
  • The Fed would not allow asset prices to fall.
  • “The euro zone and its banking system were fatally flawed and bound to suffer;”
  • China’s economy would undergo transition and “would no longer underpin mad rises in commodity prices;”
  • “Disbelief and disillusion with monetary policies that seemed manifestly unfair to the poor would spark the younger generation into a desperate search for something better.”

It then outlines the decade’s hindsight-graced trades:

  • Betting on the “immaterial world” of the internet economy by way of the S&P 500 Software Index, which it reported returned about 470% (led by Microsoft).
  • Buying the S&P 500 Index because “it was obvious to Hindsight Capital that the Fed wouldn’t let asset prices fall and would leap in whenever necessary.”
  • Betting that banks would recover in the U.S., but that European banks would not.
  • A gamble on cryptocurrency: “Traditionally, gold might have been the answer to the prayers of this distrustful generation. But technology expanded horizons. So, Hindsight Capital bought Bitcoin.”
  • Hindsight Capital, “of course, foresaw the growth of passive investing, and worked out that by far the best way to invest was through the companies that draw up the indexes.” The article notes that although the fund management industry has correctly argued that markets couldn’t function properly if all funds were passive, it adds that, “if the active management industry keeps performing like this, the future doesn’t look bright.”