Bloomberg, July 1, 2009
Commentary by David Reilly
Markets sank last year. So too did hedge-fund performance. Markets soared in the just-finished quarter. Hedge funds notched up big wins. Now remind me why they are called hedge funds.
Bull-market geniuses may be a better moniker. For all the talk of being able to make money whether stocks rise or fall, hedge funds too often look more like index-hugging mutual funds.
Some academic research shows hedge funds are no better at stock picking than the buy-and-hold crowd. Add in the hefty fees hedge funds often charge, and they are “a worse vehicle than mutual funds,” argues an academic research paper entitled, “How Smart Are the Smart Guys?”
Its conclusion: Not very. Or at least not as smart as many hedge-fund guys think, especially now that markets are again giving them a lift….The paper, by John Griffin, an associate professor of finance at the University of Texas at Austin, and Jin Xu, of hedge fund Zebra Capital Management LLC, raises doubts about “the ability of hedge-fund management to add value” for investors. Read more.
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1 Bart Mallon // Jul 2, 2009 at 11:07 pm
This is very interesting considering that Congress and the SEC are thinking of making hedge fund registration a requirement. Mutual funds are already subject to many registration requirements, including the requirement that their managers register with the SEC.
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