Many managers compare their performance to an index (S&P, etc) as a means to justify why investors should invest in them rather than in the index itself. Does the outperformance really matter when both the manager's and the index's returns are negative? I don't think so.
If I am conservative and do not want to invest in the market, I will let my money earn 2.5% as it sits in cash/T-bills. That's tremendously better than the 6/30 YTD S&P return (-12.8%).
For the quarter ended 6/30, my portfolio outperformed the S&P by +18%.
YTD I am up 1.2%. While that might seem impressive compared to the S&P, it's only slightly above par for T-bills YTD. I feel I have a lot of work to do for the second half of the year.
Let's talk about fees for a minute (which do not apply in the Vestopia portfolio return for my subscribers). In which case should an investor have to pay for underperformance? Neither. In which case do investors have to pay fees? Both!
Since most hedge fund managers now use cash as a watermark in order to earn their 20% fees, managers only receive their 1-2% maintenance fees when they can't beat cash.
You might argue that this is too much relative to mutual fund/long-only managers...but which relative performance would you rather have?