What exactly is a “sophisticated” investor anyway?
|Feb 21st, 2010 | Filed under: Academic Research, Featured Post, Today's Post | By: Alpha Male||
One of the most overused words in hedge fund sales is “sophisticated.” If we had a nickel for every time a hedge fund marketing sheet proclaimed that a fund was for “sophisticated investors,” we’d be running a hedge fund for, well, sophisticated investors.
But what exactly does it mean to be sophisticated? This is a question addressed by Jan de Dreu of RBS and Jacob Bikker of De Nederlandsche Bank in a study of Dutch pension plans. The duo bases its analysis on the fair assumption that “sophisticated” means “not succumbing to behavioural finance biases.” While many studies have examined behavioural biases in individual in private investors, they write, “much less is known about professional parties.” More…
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