First off, congrats on your returns and thanks for all the info you post on the board.
I agree that it doesn’t make sense, but I also think a few factors play into this.
The hedge fund world is controlling increasingly more assets and order flow, they are fairly large fish in a large pond, and a lot of them end up in crowded trades. As they get bigger more and more of them will revert to the mean because they make up such a large amount of the overall market.
If we think of the market in recent years, hedge funds have endured the ultimate pain trade. The “value” they were supposed to provide via active management and their expertise simply got trounced by the rise in the indices in 2013 and 2014 (though '14 had more dips along the way). But those 2 years, regular index investing and dollar cost averaging provided great returns, and simply holding quality stocks did even better.
Basically in those years, you got paid for doing less in the markets rather than more.
Over the past 12 months, as volatility started to come back near the end of last year, imagine you were a manager of a large fund who was being beaten by passive indexes who needs to somehow prove your value to your investors. Everyone is trying to be the smartest guy in the room, but only 50% can be better than average, though all think they are in the top 10%.
So, in that position, how does this fund manager find the end that puts them ahead of the market? Maybe they were shorting all year betting on a collapse and taking losses up until August. Now what? Do they bet on more downside from here or do they go long? If they were short they are getting killed on the current partial price recovery.
Let’s say the market gets closer to all time highs again as we get to year end, now they either need to go long again at worse prices or decide to play the short side again and hoping you don’t lose your shirt.
All of this then happens with the regular timeframe checkins with investors or earnings releases (for the public companies), so there is a need to show performance on a different timeframe then the possible thesis for a position, which often leads to riskier positions and setting themselves up in less ideal risk situations.
Can’t say I can explain it all, but that is my take in summary. The good thing is that as individual investors, you can make your own rules and decisions about timeframes, holdings, and strategies.
While the big fish make the waves, the small fish can make out pretty well by riding the right waves while they are there, and getting off the waves once it starts to break (i.e. BOFI recently)