When 'The Party' Had To Stop

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Okay. Now we're going to immediately retract the metaphor of our earlier post (if not it's message). No more references to "the party" when discussing hedge funds. It's as cliched as "rockstar investment banker." We've, you know, been in hedge fund offices. They aren't exactly a party.

But Wall Street never learns from its own history, which proves that every good idea, taken too far, turns into a bad one. Yes, some hedge funds make gobs of money. But with 9,000 of them swarming over the same markets, they can't all be successes.
"Hedge funds have probably come too far too fast," admits Cliff Asness, who himself hedges more than $9 billion at AQR Capital in Greenwich, Conn.
Sure enough, so far this year, as the U.S. stock market gained more than 8.5 percent, the average hedge fund rose only 6.8 percent. (It's worth noting, too, that hedge funders use notoriously fuzzy math in calculating returns; a Yale study estimated that average performance may be overstated by up to five percentage points a year.)
So what does all this mean for Average Joe investor? That you didn't miss much by not being invited to the party.


How to beat hedge funds
[Money in CNNMoney.com]

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