Thursday, November 29, 2012

The curious case of the crumbling hedge fund returns

2012 has apparently been a bad year for hedge funds.  In Forbes, Nathan Vardi argues that the focus on a recent bout of insider trading at SAC Capital Advisors is a distraction from this more pertinent story, or to quote his headline; 'For Hedge Fund Investors, the real crime of the year is lousy performance, not insider trading'.  

Hmmmmmm....  Let us consider this analytically, you and I, and ask the coy little question - perhaps there is a link between the sudden spate of insider trading clampdowns and the unusually bad year it has been for hedge funds?  Maybe a good portion of the hedge fund class decided to stop using a river of information they previously relied on, in fear of an ominous door-knock by large men with badges and guns?  And that this explains their poor returns compared to the market as a whole, and that their previous wealth was not accumulated on the back of superior brainpower or sophisticated software, but via this simpler, ancient method of resource transfer.

Dangerous thoughts... dangerous, dangerous thoughts... 

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