Apple vs Hedge Funds

It’s not hard to see why Apple has captured the attention of the financial media as thoroughly as it has. We’ve all watched Apple go up, up and up over the past 5 years, and most investors out there have probably looked in the mirror at some point and thought, “What’s the point of all this research and hard work? Why bother doing due diligence and analyzing stats until I’m blue in the face when an investment in Apple would have trounced anything else I could have gotten my hands on, including Gold?”

Since becoming the largest publicly-traded company on Earth, ways of using Apple as a yardstick have flourished (how many countries Apple is bigger than, how many iPads Apple is worth, and other things Apple is worth more than). This got us wondering… how would the Apple yardstick look when applied to the hedge fund industry? The comparison seems especially fitting considering that 216 hedge funds hold Apple shares, and more hedge fund managers have Apple in their top 10 holdings than any other company. So here it is – Apple vs. Hedge Funds:

1. Market Cap

If Apple’s market cap were instead the assets under management (AUM) of a hedge fund, it would be the largest hedge fund in history by a comfortable margin. In fact, Apple’s value ($605.96 Billion as of 3/20/2012 close) is over 1/3 the size of the $1.64 trillion invested in the hedge fund industry (as of the end of 2011, according to BarclayHedge), and nearly five times the size of Bridgewater Associates, the world’s largest hedge fund at roughly $125 billion. Size: Apple in a landslide.

2. Number of Employees

According to the company’s 2011 10-k filing with the SEC, just over 60,000 people count themselves as full-time employees of Apple. That’s significantly more than hedge fund heavyweight Bridgewater, which employs only around 1,200 people. Number of employees: Apple.

3. Tax Rate

Like hedge funds, which have been heavily criticized for paying the 15% tax rate for “carried interest,” Apple has found its tax rate a source of contention in some circles. Apple reports a worldwide effective tax rate of 24.2%, however the company only books about a third of its profit in the US, paying an effective tax rate of 31%. The other 70% of profit is booked overseas at an effective tax rate of 4.7%… and that comes out to a 12.6% rate. However, the way that Apple reports its foreign earnings (by not declaring them as permanent investments in foreign companies, but also not repatriating them) increases its effective tax rate without actually changing the amount paid. All in all, this one’s a push.

4. Length of Track Record

Apple was first publicly traded in September of 1984, giving it a track record of 27.6 years, which would make it one of the longest-running hedge funds.

5. Performance

And of course, the performance numbers (Past performance is not necessarily indicative of future results):

1 yr return 3 yr return 5 yr return Max DD
Apple 81.78% 491.52% 559.61% -83.08%
Barclay’s Hedge Fund Index -1.76% 39.17% 16.06%

-31.73%

So there you have it – if Apple were a hedge fund, it would be the biggest, best-performing hedge fund around. Of course, the prospect of an 80% drawdown is fairly terrifying, and Apple has experienced such pain on two separate occasions (once in 1997 from the April 1991 equity high and again between 2001-2003 from the March 2000 equity high). An 80% drawdown today would put Apple at about $121 billion, wiping out the last three years of gains. Again, past performance is not necessarily indicative of future results, but Apple has definitely left the professional money managers in the dust in the last few years.

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The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

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Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

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See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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