Wednesday, June 27, 2007

Fund Creator

The New Yorker reports that hedge funds charge more in fees than the value they add :
“It is possible to design mechanical futures-trading strategies which generate returns with the same, and often better, risk-return properties as hedge funds,” [Kat] said. “This means investors can have hedge-fund returns but without the massive fees and all the other drawbacks that come with the real thing.”
What you need to replicate this : a highly trained British trader-turned-academic and a graduate student in finance trained in computer programming. And Voila! You can create or replicate as many hedge funds as you wish, with no fees to boot.
"If you are really convinced that you can find those super managers, then don’t waste your time with our stuff. Go look for them. But if you are a bit more realistic, if you know that eighty per cent of hedge-fund managers aren’t worth the fees they charge, then the rational thing to do is to give up trying to find a super manager, and just go for a good, efficient diversifier instead."

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