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He's also identified the narrative as a popular excuse among the poorest-performing hedge funds ("We valued the stocks properly, it is the market that is wrong.

He's also identified the narrative as a popular excuse among the poorest-performing hedge funds ("We valued the stocks properly, it is the market that is wrong." and "We aren't even trying to beat the market, we are merely offering a different risk proposition.") After over a decade of data, hedge funds must compete against the more compelling narrative, that hedge fund winning streaks are a matter of chance, and that the average investor isn't capable of picking one with prolonged better-than-market returns.

dsacco 11y ago
>> hedge fund winning streaks are a matter of chance... Hedge fund winning streaks are not a matter of chance, they are just extremely difficult to pull off. In practice these two things appear similar; in theory they mean entirely different things about the market.
- adrianN 11y ago
  If the market is reasonably efficient, I don't see how there can be a strategy that beats the market forever. But I'm also not an economist.
  - dsacco 11y ago
    Successful hedge funds don't use static strategies over a significant period of time. Instead, they are very good at developing new strategies. Thus, it's not the hedge funds' strategies that need to be consistent, it's their R&D.
- jabv 11y ago
  Thank you. An important distinction. The same idea gets me going in discussions about turnover rates among football teams. (Teams tend to regress to the mean year-over-year in how often they fumble, so some writers insist fumbles are "caused" by chance.)
- justincormack 11y ago
  That is hard to prove, and is also not necessarily useful for anyone making a choice of where to invest, if the rare events are pretty unpredictable and "pretty hard to pull off" they may as well be treated as random by investors. There clearly are strategies that make money at times. The majority off hedge funds do not offer these, and what they offer is hidden by their fees, which do not correspond to results, and even discourage good results as they encourage volatility.

dsacco 11y ago

>> hedge fund winning streaks are a matter of chance... Hedge fund winning streaks are not a matter of chance, they are just extremely difficult to pull off. In practice these two things appear similar; in theory they mean entirely different things about the market.

adrianN 11y ago
If the market is reasonably efficient, I don't see how there can be a strategy that beats the market forever. But I'm also not an economist.
- dsacco 11y ago
  Successful hedge funds don't use static strategies over a significant period of time. Instead, they are very good at developing new strategies. Thus, it's not the hedge funds' strategies that need to be consistent, it's their R&D.
jabv 11y ago
Thank you. An important distinction. The same idea gets me going in discussions about turnover rates among football teams. (Teams tend to regress to the mean year-over-year in how often they fumble, so some writers insist fumbles are "caused" by chance.)
justincormack 11y ago
That is hard to prove, and is also not necessarily useful for anyone making a choice of where to invest, if the rare events are pretty unpredictable and "pretty hard to pull off" they may as well be treated as random by investors. There clearly are strategies that make money at times. The majority off hedge funds do not offer these, and what they offer is hidden by their fees, which do not correspond to results, and even discourage good results as they encourage volatility.