No surprise here. 2/20 is hard to beat on broad, sustained basis...
A Limited Supply of Geniuses
In todayâ€™s Times, my colleages Jenny Anderson and Landon Thomas Jr. report that hedge funds as a group are underperforming the stock market.
That should be no surprise. Even with the wonders of leverage, outperforming the stock market by enough to overcome the typical hedge fund managerâ€™s compensation of 2 percent of assests and 20 percent of profits ought to be very difficult. As a group, it is very unlikely that a large group of hedge funds could do so on a prolonged basis.
Some â€” including me â€” have long feared that hedge fund blow-ups would provoke the next big financial crisis. Perhaps that will be avoided, but hereâ€™s a forcecast:
Within 10 years, and probably less, those who paid the big management fees to hedge funds will be asking themselves, â€œWhat were we thinking,â€ and conventional wisdom will be as scornful of them as it is not of those who jumped into Internet stocks in early 2000.