Once again, the New York Times provides an all-too-uncommon rational and clear-headed analysis of the hedge fund industry – without the populist hype that many mass media outlets have come to rely on to sell papers.

Friday’s article “How This Boom Differs From the Dot-Com Days: Hedge Funds Make Money” is insightful for two reasons.  Firstly, it draws legitimate parallels between the hedge fund boom and the dot-com boom.  And second, it explains exactly where those parallels end.  Still, we’d say the article might be a little quick to write off over-valuation risk in the hedge fund industry.

Says the Times:

“The bubble talk derives in part from some of the startling similarities between the technology boom, circa 1999, and the current hedge fund gilded age. During both periods, top Wall Street bankers and traders abandoned their traditional confines in search of big money, casual dress and guaranteed free fresh fruit. Each era included lots of talk about paradigm shifts, much of it from self-interested quarters like Wall Street, which always finds a way to turn the next best thing into a pile of loot. In both instances, small groups of very young people made eye-popping sums of money. And now, add to the eerie similarities the fact that hedge funds are racing to go public.”

No doubt there are striking similarities between these two capital market mega-trends.  In fact, one of the first postings on this website made the very same comparison (see “Hedge Funds: E-Business Redux?”)

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