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Hedge fund skeptics

The "average" hedge fund is incompetent. Over time the aggregate returns of "all" funds will underperform cash minus fees and transaction costs. That's why manager selection is as important as security selection. I pay no attention to so-called stock indices or "databases" of hedge fund returns. It is rare skill that must be sourced NOT the "asset class" reporting the returns of bozos that think they can run a hedge fund. I pick good funds and good securities. Avoid the crowd.

Hedge fund skepticism is good. Thorough due diligence by investors is essential. I am as concerned as anyone at the entrance into the industry of managers who clearly have no skill and of established managers whose skills are no longer relevant to today's markets. But taring all hedge funds with the same brush is not valid. A high hedge fund attrition rate is a GOOD sign. How many new businesses in any industry succeed? 10%? Good venture capitalists do well even if as many as 80% of their portfolio companies fail.

Many hedge funds close down due to success rather than failure. The manager having made enough to retire. Even when a hedge fund does close down due to failure, it is exceptionally rare for investors to lose all their money. There seems to be an assumption, even in "peer-reviewed" empirical studies, that a fund that no longer exists must have lost all the money. Hardly.

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