The Role of Hedge Funds in the Financial Marketplace
I hadn't seen this paper on WSO yet, so I thought I would go ahead and share it. Obviously, a number of monkeys on this forum aspire to be hedge fund managers one day, so it's always worth asking:
Does my life's work add value?
According to this study, "The value of the hedge fund industry to investors, markets, and the broader economy," you just might! (Although this is perhaps not so surprising, when you consider that the study was undertaken in part by the AIMA).
The research found that hedge funds achieved an average return of 9.07 percent in the period 1994–2011 after fees compared to 7.18 percent for stocks, 6.25 percent for bonds and 7.27 percent for commodities. Hedge funds achieved these returns with considerably lower volatility and Value-at-Risk (VaR) than stocks and commodities, close to bonds in both categories. The research also demonstrated that hedge funds were significant generators of “alpha”, creating an average of 4.19 percent per year from 1994–2011.
Couple this with another recent study which found that hedge funds falling in the upper quartile of performance are far, far more likely to fall in that quartile the following year, and you have something to talk about when people wonder aloud if there's just no beating the market, and if you're simply a leech leeching off the pre-leeched remains of Main Street investors.