I entertained myself recently by attending an investment conference here in San Francisco. Some dude from a feeder fund for hedge funds introduced himself to me by asking, "So, you're saying you'd pay a premium for a manager who can outperform?" I smirked and told him "yes" then specified that my premium would be precisely zero. It is a waste of effort to seek out managers who may outperform in the short term because their returns invariably revert to a mean over the long term, so paying them any premium at all is a waste of money. That premium is the reason hedge funds actually underperform a passive indexed investment.
More hedge fund investors are now finding this out the hard way. Man Group, one of the world's largest agglomerator of hedge funds, has lost 25% of its value as its investors have begun redeeming their investments. Even leading hedge funds can't get it right. Gee, that's just too bad. All of those whiz-bang models couldn't beat market benchmarks after all. Portfolio management skill is so genetically rare that those few people who do possess it - Warren Buffett of course comes to mind - happen to also be innovators whose wisdom is widely available for free.
No hedge fund will ever get my money.
More hedge fund investors are now finding this out the hard way. Man Group, one of the world's largest agglomerator of hedge funds, has lost 25% of its value as its investors have begun redeeming their investments. Even leading hedge funds can't get it right. Gee, that's just too bad. All of those whiz-bang models couldn't beat market benchmarks after all. Portfolio management skill is so genetically rare that those few people who do possess it - Warren Buffett of course comes to mind - happen to also be innovators whose wisdom is widely available for free.
No hedge fund will ever get my money.
