Bloomberg Brief recently caught up with Nixon speechwriter, actor and Clear Eyes shill Ben Stein to pick his brain on the state of the hedge fund industry. Stein’s thoughts? Investors are getting robbed on management/performance fees and the only way a hedge fund can beat the market is via insider trading which Stein wants no part of in case anyone was wondering.
“This has been an absolutely monumental recent period for event-driven arbitrage, so that’s what I love,” Ben Stein said in an interview. He dislikes currency hedge funds because the strategy is “too treacherous.” “I don’t have any confidence that the people I’d be working with can outperform any kind of index of it,” he said…Retail investors should invest in exchange-traded funds or mutual funds that replicate hedge fund returns, Stein said, because they charge lower fees and have better returns.
“These simulacra of hedge funds are going to completely change that world,” he said. “that is the wave of the future. If you’re getting the same results as you get if you’re paying 2 and 20, why not go with the $5,000 minimum investment and the fee of $100?” The federal government’s insider trading investigation is also another reason to avoid investing in traditional hedge funds, he said. “Financial theory tells you that you cannot beat the large indexes unless you are getting inside information, and I don’t want to be part of anything that involves inside information.”