The article suggests you'd be better off if a monkey managed your hedge fund. That's pretty silly generalization. WHICH monkey???
Oct. 26, 2011, 12:00 a.m. EDT
Can a monkey pick a hedge fund?
Commentary: They may match a typical fund of hedge funds
By Brett Arends, MarketWatch
BOSTON (MarketWatch) — Hedge funds are scary. They are complicated, confusing and risky. If you’re a rich investor — the member of a wealthy family, say, or someone running a big endowment — you need someone to help you pick the right ones and avoid the disasters.
To help you out, we’ve assembled two teams.
On the one side we have assembled a highly professional group of investment advisers running a “fund” of hedge funds.
The team will greet you in their beautiful offices on the waterfront in Greenwich, Conn., or maybe Palm Beach. A beautiful secretary will serve you a beautiful cappuccino with just the right amount of cinnamon and nutmeg on top.
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On the other side we put together a group of monkeys kidnapped from the local zoo.
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Which investment approach does better?
I believe in reason, logic and the human mind, so I wish I could say the first. Alas, I have just finished reading “Assessing the Performance of Funds of Hedge Funds,” a research paper produced by Benoit Dewaele and Hugues Pirotte of the Universite Libre de Bruxelles (the Brussels Free University in Belgium), and Nils Tuchschmid and Erik Wallerstein of the Geneva School of Business Administration in Switzerland. The paper is here.
They studied a broad sample of 1,300 funds-of-funds from 1994 through 2009, and analyzed just how much value they actually created.
Their core finding? When you strip out the fees, just 22% deliver any “alpha,” or risk-adjusted investment gains, at all.
And most of those gains came from the underlying hedge-fund indices, rather than from picking the right individual managers.
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As Ilia Dichev at Emory University and Gwen Yu at Harvard found, after looking at hedge-fund performances over the past 30 years, the average has done worse than a stock-market index fund — and not much better than a simple basket of Treasury bonds.
No wonder the monkeys in the zoo always seem to be laughing. They’re looking at us.
Full story: http://www.marketwatch.com/story/can-a-monkey-pick-a-hedge-fund-2011-10-26?dist=beforebell
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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