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The Role of Hedge Funds in the Financial Marketplace
 

atomic's picture
(Baboon, 160
 
Points)
 on 4/29/12 at 7:52pm

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).

From KPMG/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.

The link:

http://www.kpmg.com/Global/en/IssuesAndInsights/Ar...

Tags:
bigun's picture

but the real question

(Monkey, 61
 
Points)
 on 4/29/12 at 9:09pm

but the real question is...

is making rich people (aka, widening income inequality) richer valuable to the society?

randomwench's picture

bigun: but the real question

(Monkey, 57
 
Points)
 on 4/29/12 at 9:12pm
bigun:

but the real question is...

is making rich people (aka, widening income inequality) richer valuable to the society?

Well if HF's generate those returns by making capital reallocation more efficient, they help poor people too by creating expansion opportunities for firms (ie: job growth).

Kenny_Powers_CFA's picture

Pensions and endowments are a

HF
(Neanderthal, 2,193
 
Points)
 on 4/29/12 at 11:34pm

Pensions and endowments are a major source of AUM for alternative-strategy managers. The beneficiaries of that alpha (which is net of management fees so forget about the economics for the manager for the moment) are not exclusively rich individuals but in many cases retirees etc.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

Gray Fox's picture

Somebody's gotta be on top of

HF
 
Points)
 on 4/29/12 at 11:43pm

Somebody's gotta be on top of the food chain...

BlackHat's picture

Value add? Who cares? I'm

HF
 
Points)
 on 4/30/12 at 12:28am

Value add? Who cares? I'm trying to feed my family over here...

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

KarateBoy's picture

randomwench: bigun: but the

AM
 
Points)
 on 4/30/12 at 12:56pm
randomwench:
bigun:

but the real question is...

is making rich people (aka, widening income inequality) richer valuable to the society?

Well if HF's generate those returns by making capital reallocation more efficient, they help poor people too by creating expansion opportunities for firms (ie: job growth).

Unless their alpha is largely driven by IPOs, and not secondary markets, then this is wrong.

BlackHat:

Value add? Who cares? I'm trying to feed my family over here...

Couldn't agree more. You do this job because you love it.

If you want to make the world a "better" place, go do something else instead of playing with excel or reading SEC filing.

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