The most interesting signal I've seen from the world of finance is a number of smart hedge fund managers shutting down their funds over the past few years, stating that fundamental value investing is now impossible as the markets are too controlled by Government policies and intervention. It doesn't seem like this is healthy long-term unless the Government can manage a very soft landing.
What a wonderfully self-serving explanation. Here's an alternative one: hedge fund managers are shutting down their funds because people are waking up to the fact that hedge funds are a terrible investment. After the managers take their 2-and-20, hedge funds have lagged the market every year, in both market ups and downs. Funds are trying to slow the rush to the exits by slashing fees (http://www.ft.com/intl/cms/s/0/693d9b74-73f3-11e5-bdb1-e6e47...) to keep more people from going the way of CalPERS, but I don't think it's going to work. There's just too much freely-available evidence that hedge funds aren't worth the fees for what you get. Blaming the government as they turn off the lights is a handy way to get at least something positive out of it though.
I totally agree with your take on the hedge fund industry as a whole. I probably should have clarified. I was speaking specifically about a very small group, like Michael Burry and Gary Schilling, who I admired for their outspoken and transparent economic trend analysis.
hedge funds on average underperform big bulls and outperform big bears. sharpe ratios matter. maybe mass fund closures signal something more interesting than that calpers is run by geniuses (hint: they aren't).
I'm really curious in this.
Would you mind linking me to some papers that compare hedge funds risk adjusted returns versus the index funds, or the market?
Well, given that they're in a position of having to shut down, if they're going to give any explanation at all, it seems unlikely that that explanation would ever be anything along the lines of "We're not very good at this" or "No one wants our product any more". Of course it's going to be someone else's fault..
