Hedge Fund Managers Glorified Coin-Tossers?
Feb 3rd, 2007 | Filed under: CAPM / Alpha Theory“To the point: Hedge funds have no science but to bet on heads or tails”
By: Edmond Warner, Daily Telegraph
Published: February 1, 2007
This article suggests that hedge funds, under pressure to perform, are simply levering-up 50/50 (”fair”) bets. According to its author, hedge funds use “pseudo-scientific investment models that are no more than cottage industry gambles”. Unfortunately, he dredges up tired stereotypes as proof and neglects to back them up with any applicable facts. So as a public service, we put this article into our “B.S.” detector to see what would come out the other end.
“(hedge fund) fees dwarf those paid to conventional money managers”
As we have discussed several times (here, here, here, here & here), one cannot look solely at a fund’s sticker price to determine its value. Long-only funds have lower sticker prices because many of them are closet index funds. And index funds have a low fee for a reason - there is very little work involved.
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