Hedge Fund Geniuses

I am hearing that hedge funds are broadly up 3% for the year. That is impressive given that they don't run anywhere close to 100% long. I am also hearing that they have all turned bullish. The returns are likely the result of a self fulfilling cycle. Hedge funds tend to cluster into the same stocks and when they turn bullish they buy more of those same stocks, improving the performance of their portfolio and the broader group.

There are undoubtedly many highly paid hedgies patting themselves on the back, feeling like the geniuses that they always knew they were. Last year was a fluke. Until the cycle turns down again ofcourse. Don't get me wrong. There are undoubtedly geniuses in the hedge fund world but for every real genius there are at least a dozen others who think they are.


Anonymous said...

The hedge fund business is a game of marketing really.  Good points regarding the talent pool.  Unfortunately it is my observation that returns alone does not gain AUM.

Tsachy Mishal said...

Very true about hedge funds being about marketing. Especially because the business has become about attracting Institutional Investors who are more concerned about covering their rears.