On the “flight to simplicity” economy class is full, while many business class seats appear to remain unfilled
Jun 30th, 2009 | Filed under: Institutional Investing, Today's Post
Much of the financial calamity of the past couple of years has been pinned squarely on one culprit (that can assume a myriad of forms): complexity. As far back as early 2008, people were starting to blame complex strategies and financial instruments for the debacle that was unfolding before their eyes.
The Wall Street Journal wrote on February 23, 2008 that:
“The past decade has been the era of the hedge fund, as investors snapped them up for their track record of beating the market with often highly complex trades. But now, as the credit crunch upends financial markets, that very complexity is coming back to bite some of them.”
Author Richard Bookstaber, an ardent advocate of the “flight to simplicity” (see related post), wrote on his blog last month that:
“Complexity is one of the demons that makes our financial markets crisis prone. Much of the complexity arises in the specter of derivatives and other “innovative” products. To reduce the risk of crisis we must exorcise this demon. We need a flight to simplicity.”
So it’s little wonder that a recent survey by CREATE-Research, the UK-based consultancy showed that institutional investors were boarding the “flight to quality” (report available here with free registration): More…
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
Related Posts
- Bookstaber’s pre-boarding call for the “flight to simplicity”
- Can asset managers balance “innovation” and “simplicity”? A new report says they better hope so.
- EVENT: EDHEC Business
- San Francisco Recap: Will “tectonic shifts” in the global economy finally give emerging markets hedge funds a chance to earn some alpha?
- Institutional alpha expectations remain (relatively) benign despite hype
