Jim Simons’ Second-Rate Ideas Will Have To Do

They’re better than anyone else’s best ideas, so, you know.
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By Gert-Martin Greuel [CC BY-SA 2.0 de], via Wikimedia Commons

By Gert-Martin Greuel [CC BY-SA 2.0 de], via Wikimedia Commons

The hedge funds promised: Just get rid of this black Obama guy and replace him with a semi-literate madman who oozes market volatility from the two fingers he uses to tweet out threats of war—trade, nuclear, whatever—and we’ll be back. It’ll be like two decades ago, when we were kings among men, masters of the universe, applying our Midas touch to making the very rich very, very, very rich, and ourselves very, very, very, very, very rich. You’ll see. And so we have.

The results for the first six months are now in — and they shatter the myth of hedge funds thriving in turbulent markets…. Hedge funds, on average, underperformed the Standard & Poor’s 500-stock index yet again.

This leaves investors in a bind. They won’t stop pouring billions of dollars into the hedge fund space, because there’s nowhere else to go. So, yes, they’ll eagerly take whatever scraps Peter Brown or John Overdeck or Igor Tulchinsky will offer them, even if they could get Tulchinsky’s good stuff by investing with Izzy Englander. And they’ll do so uncomplainingly, or else.

They can invest in the “open” funds of these successful managers. The results of these open funds generally aren’t as strong as the exclusive, employee funds, and they can carry an array of potential conflicts, investors say.

Despite the drawbacks, investors have been choosing this option en masse, making these outside funds among the hottest products on Wall Street….

After big European hedge fund BlueCrest Capital Management launched an internal fund for its partners in 2011, it saw much better returns compared with funds BlueCrest offered to outsiders, investors say. Advisory firm Albourne Partners Ltd. raised questions about how the fund was run. Eventually, BlueCrest closed its outside funds, and now the firm’s founder, Michael Platt, runs a fund trading his own money.

These Hedge Funds Are Doing Great but Don’t Want Your Money [WSJ]
Hedge Funds Should Be Thriving Right Now. They Aren’t. [NYT]

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