Couple of things go through my mind when looking at this graph and thinking of yesterdays headlines (FBI probe into insider trading).
1. Are mututal funds and pension funds not prone to insider trading like hedge funds seem to be even though they manage much more money?
a. because their managers don't have incentives (performance fees) to try and get information that pays off.
b. because those managers and the pension&mutual funds they manage are raping their investors as banks help them
i. by buying structured products (with high fees inbuilt)
ii. by getting hidden kick backs (invitations to sporting events, cash envelopes)
ASSETS MANAGED
2. This graph misrepresents who is active in the market. Hedge funds would probably lead turnover by a large margin.
Maybe those who trade often are more likely to look for short cuts...
3. I guess you can look at it another way: Hedge funds will go the extra mile to get good performance for you as an investor. And sometimes they tend to cross a certain line when going that extra mile :D
If I'm given an opportunity to manage one of those, I'd choose a hedge fund for sure. :D
ReplyDeleteI agree, a hedge fund is freedom.
ReplyDeleteFund managers need to fight through onerous departments such as compliance and investment commitees etc... just a nightmare to anyone wanting to adapt to fast changing situations.
And most important: The consensus culture and likeliness to follow or hop on board strong trends are much stronger at mutual funds and pensions funds. That's why the underperform as a group vs. ETFs and hedge funds, IMO.