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Hedge Fund Returns Are Falling Because Hedge Fund Returns Used To Be Just Great

Forbes – Dam McCrum over at FT Alphaville has a look at why the top hedge fund managers are making so much darn money. I don’t disagree with anything he says I just want to pick up on a point and expand it. For we can explain some of what has been happening just with some pure Adam Smith from a couple of centuries ago. what is being said here about new and small hedge funds also rather applies to the entire industry:

Small and young hedge funds are nimble, their managers are focused, and they can concentrate their capital in a small number of good ideas without moving prices or attracting attention. One study by Barclays found that funds under two year’s old, and managing less than $100m typically make better investment returns than their larger older peers.

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