Tech Central Station's Dominic Basulto suggests that the plebes are getting into hedge funds inadvertently by putting their money into mutual funds that employ hedging strategies. We guess he's technically correct, since some mutual funds take small positions in hedge funds, but we think think there's a difference between portfolio diversification and the sort of hedging strategies the funds that actually hedge (and increasingly, fewer do) employ. At any rate, you know it's bad when Kiplinger's is recommending Hedge Funds for the Little Guy:
According to David Landis of Kiplinger's, "a growing number of mutual funds offer nearly all of the benefits of hedge funds with none of the drawbacks. And all you need to get through the door is a minimum investment of $1,000 to $2,500." While all of these funds deploy their capital in different ways, they all share a common attribute: the desire to create relatively low-risk hedged positions for investors.
Basulto also points to Michael Steinhardt's recent comments that average investors shouldn't be putting their money in hedge funds because they don't know what they're doing. We'd go a little further than that and argue that a number of hedge fund managers we know shouldn't be investing in hedge funds because they don't know what they're doing, either.
DIY Hedge Funds [TCS Daily]