Last week in the markets was all about what was happening below the calm surface waters, which saw the DJIA post a tiny increase and the S&P dip just a fraction. If one was going off merely by the two main indices, one would certainly have missed the drubbing that tech and specifically biotech stocks suffered. However, nowhere was it worse than in the "hedge fund hotel" basket of names most near and dear to the hearts of hedge funds, and respectively those most hated, one which Goldman defines as the long Very Important Positions <GSTHHVIP> vs. short Very Important Shorts <GSTHVISP>. It was here that P&Ls saw one of the worst weekly losses for hedge fund positions since 2001.

According to Goldman's David Kostin, the past week has been among the worst 5-day returns for GSTHHVIP relative to the S&P 500 since 2001.  

The past 5 trading days rank in the lowest 2% of returns since May 2001 and are the worst aside from the sharp market retreat in 2002, the 2008 financial crisis, and 2011 debt ceiling debate. A stable S&P 500 makes the current underperformance more notable."

Especially when after five years of underperforming the market, investors continue to ask themselves just what are they paying hedges 2 and 20 for - obviously it is not to hedge risk, in a market in which the Fed has made it all too clear a market downturn is no longer a possibility. It must be for the "benefits" of the herd effect of everyone loading up on the same positions, and when one sells, everyone sells and leading to sharp losses for the bulk of the "smart money out there."

What else: "Key stock contributors to hedge fund underperformance were longs in AMZN, GILD, DISH, PCLN, YHOO, and FB that are each down at least 5%. Favorite shorts such as SLB, T, IBM, JNJ and EXC are up more than 4%."

Where have we seen before? And, more to the point, where have we warned this would happen? Why here: "Presenting The Best Trading Strategy Over The Past Year: Why Buying The Most Hated Names Continues To Generate "Alpha"."

Finally, the good news: at least hedge funds, which apparently where whipsawed with a big position and pair trade unwind last week, are not levered to the hilt. Oh wait...

Nevermind.