Alternative Finance

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Normally, I detest most blogs. Honestly, if I was someone else, I would probably detest this one. Blogs, which can be great, but they can also be self-indulgent and predictable. I have friends that blog and when I receive an email that they have a new posting, it often goes straight to a Junk folder, where I either read it later or promptly delete it and am infuriated by the idea that someone has written something that I (or anyone else) would find remotely interesting or would take the time to read. I don't expect any different treatment of mine so harsh criticism or general apathy will be allowed (if not expected). I do regularly read some blogs and will try to keep this informative and well-written.

Monday, February 7, 2011

Hedge Funds substantially outperform market index

Over the past ten years, as of Dec. 31, 2010, the S&P has generated a cumulative return of -3.75%. During this same period, the average hedge fund has generated cumulative returns of +92.35% (*figures provided by Hennessee Group). The reason for this is simple. Due to the compensation structure within hedge funds, some of the brightest minds in the world, and certainly many of the brightest minds within the financial industry have gravitated away from banks, mutual funds, investment banks to either join hedge funds or launch hedge funds. The Volcker Rule is certainly helping to expedite that brain-drain.
Please see article:
http://mail.courtesycorporation.com/exchweb/bin/redir.asp?URL=https://village.albourne.com/user/news.pcg?id=77784%26f=d
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2 comments:

  1. Trey JohnsonFebruary 10, 2011 at 6:50 PM

    Another reason for this very large number is selective reporting which results in upward bias for hedge fund indexes. Hedge Funds are not legally required to disclose returns. Funds that do well report, to gain more investors, funds that don't do well don't report. Funds which are doing well and reporting, then experience poor returns and stop reporting. Overall, this creates a very large upward bias in the returns. Hedge Fund Indexes are notoriously poor representations of the overall risk and returns associate with these investments.

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  2. Leigh LommenMarch 22, 2011 at 10:15 AM

    Trey, you are 100% correct. There is definitely biases in this report. Particularly, survivorship bias.

    Regards,
    Leigh

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