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Wednesday, August 22, 2012

Hedge Fund Performance

Veblen: author of The Theory of the Leisure Class
Yesterday's buzz on CNBC centered on hedge fund performance and the article Panic in Hedge Fund Land by Lee Brodie that reported that only 11% of the hedge funds tracked by BarclayHedge outperformed the S&P 500.  Hedge funds are available to "sophisticated investors" at a hefty fee.  They are managed by the "Masters of the Universe" of the investment world.

The unsophisticated seek to be sophisticated.  This is a fact of economic life and is just a variation of Veblen's observations on conspicuous consumption.  This is an area where you don't want to be sophisticated.  Stick with the proven low-cost, well-diversified index funds.

Here's some insight into this corner of the investment world:  The 10 Greatest Hedge Fund Implosions of All Time by Thorton McEnery.
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2 comments:

  1. The GrouchAugust 22, 2012 at 10:46 AM

    Gee, when you pay the manager a 2% management fee on average and then a performance fee above and beyond that, you have to make a lot of winning bets to beat the market with those kind of expenses.

    ReplyDelete
  2. diy investorAugust 22, 2012 at 9:24 PM

    Hey ...these guys are so smart they should be able to overcome those fees. Hah!

    ReplyDelete