BusinessWeek Slams "The Hedge Fund Myth"

A blog about business and economics.
July 11 2013 8:16 AM

BusinessWeek Slams "The Hedge Fund Myth"


BusinessWeek has a new cover story out by Sheelah Kolkhatar about how despite the perception that hedge fund managers have large erect penises, their penises are actually quite squiggly looking. No it's actually about how despite the perception that investing in hedge funds is a great way to make money, the industries returns are disappointing and you shouldn't invest in one, you shouldn't want your pension fund to invest in one, and even if there's a great hedge fund out there you're not going to know how to identify it at the right now.

Something that I think is worth saying about this is that in my experience among laypeople the same folks who tend to have a negative emotional response to ideas like "efficient financial markets" are also the folks who have a negative emotional response to hedge fund managers. Basically hedge fund managers are involved in financial markets, so people who don't like financial markets also don't like hedge fund managers. But the reality is something more like the opposite—you're not going to make money turning your cash over to hedge fund managers because financial markets work pretty well. Inefficiencies exist and profit-making opportunities arise, but they don't just last forever. People rush in and the opportunities vanish, or else they simply aren't large enough to be exploited at bigger and bigger scale. Returns to skilled investing end up accruing to the people who have the skills (i.e. the managers) rather than to people who just have money.

It's a bit like how the television manufacturing industry has turned into a disaster not because the technology of the television is bad or because nobody knows how to make one, but because the technology is too good and competition has soaked away the returns. The difference is that hedge fund managers are able to exploit a weird tax loophole to pay much less than they ought to. That's worth complaining about. But it's a tax code problem, not an issue with the actual conduct of the funds.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Don’t Worry, Obama Isn’t Sending U.S. Troops to Fight ISIS

But the next president might. 

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Altered State

The Plight of the Pre-Legalization Marijuana Offender

What should happen to weed users and dealers busted before the stuff was legal?

Surprise! The Women Hired to Fix the NFL Think the NFL Is Just Great.

You Shouldn’t Spank Anyone but Your Consensual Sex Partner

Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Altered State
Sept. 17 2014 11:51 PM The Plight of the Pre-Legalization Marijuana Offender What should happen to weed users and dealers busted before the stuff was legal?
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Dear Prudence
Sept. 18 2014 6:00 AM All Shook Up My 11-year-old has been exploring herself with my “back massager.” Should I stop her?
  Double X
The XX Factor
Sept. 17 2014 6:14 PM Today in Gender Gaps: Biking
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 8:25 PM A New Song and Music Video From Angel Olsen, Indie’s Next Big Thing
Future Tense
Sept. 17 2014 9:00 PM Amazon Is Now a Gadget Company
  Health & Science
Bad Astronomy
Sept. 18 2014 7:30 AM Red and Green Ghosts Haunt the Stormy Night
Sports Nut
Sept. 17 2014 3:51 PM NFL Jerk Watch: Roger Goodell How much should you loathe the pro football commissioner?