Todays MUST READ comes from my colleague Ben Carlson discussing some of the nuanced issues surrounding hedge funds:
Hedge funds are a lightning rod in the financial industry. The most vocal critics and proponents both offer extreme views that paint a very different picture of the same topic. Some will bash hedge funds no matter what while others rush to their defense anytime they’re criticized.
On the one hand you have the critics who can’t seem to understand why anyone would ever invest money in a group of funds that have collectively failed to beat a simple 60/40 stock-bond mix every single year since 2002 while also charging outrageous fees and locking up investor capital in an illiquid fund structure.
On the other hand you have the proponents who work or invest in hedge funds that point to the long-term track records of legends such as Stanley Druckenmiller, George Soros, Ray Dalio, Seth Klarman, Daniel Loeb, Jim Simons and others who have had enormous success in the markets and built enormous sums of wealth because of it.
Ben also jumps into related issues of the institutionalization of hedge funds, how their narratives are constantly changing, that the term “Hedge Fund” is a misnomer, why Fees are so high, Probabilities, The Yale Model and last, the Competition in the space.
Its your must read of the day.
My Thoughts on Hedge Funds
Wealth of Common Sense, October 1, 2015