This week’s Economist successfully nails blancmange to the wall
Feb 17th, 2008 | Filed under: Hedge Fund Industry Trends
This week’s Economist contains a great analysis of how commonly-held beliefs about hedge funds may be urban folklore. In fact, the piece makes so many succinct arguments, that we can’t really add much other than to suggest a few related AllAboutAlpha.com postings for anyone looking for additional perspective.
“Trying to assess the behaviour of hedge funds is a bit like attempting to nail a blancmange to the wall. It is all too easy for the truth to slip away.”
“…Take hedge-fund failures. Most funds close down because it does not pay their managers to continue, not because their performance has been disastrous. For every Bear Stearns ‘enhanced-leverage’ fund that loses all of its value, there are five or six funds that shut after a fall of a few percentage points…Doubtless more hedge funds will fail this year, but that will not necessarily be a sign of the industry’s demise.”
(Related posting: “Are some hedge funds sinking or just sailing into the sunset?”)
“…A survey by William Fung and Narayan Naik of the London Business School examined five different benchmarks and found that only 3% of constituents were common to all of them.”
(Related posting: “Only 3% of Hedge Funds in All Five Major Databases“)
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