West Palm Beach, FL ( www.hedgeco.net ) – According to Bloomberg news reports, Tom Muldowney, the managing director at Savant Capital Management in Rockford, Ill. has criticized hedge funds for their high costs. Muldowney suggested that investors could avoid high costs by investing in alternative vehicles and index funds. He told Bloomberg news, “You have to be able to lose it all in a hedge fund.” Arguing further that, “For most people, this is unacceptable. If you want to truly lower risk, you can use index [mutual or exchange traded] funds that employ much lower-than-average risk with modest expenses.”

Muldowney compared hedge funds with promising new drugs, arguing that investors pay expensive cost to invest in such instruments and that investors don’t know much about them. He argued further that hedge funds have the freedom to do as they choose as far as their trading activities, however such freedom could be described as advantageous, but they come at a cost to hedge fund investors. Muldowney believes that since hedge fund managers control the allocation of assets, they also control the target rate of return.

A professor of finance at the Wharton School of the University of Pennsylvania in Philadelphia told Bloomberg, “Even a moderately sophisticated investor wouldn’t have the tools to evaluate most hedge funds.”

However such criticisms against hedge funds don’t match up the hedge fund returns to their investors who continue to seek hedge fund strategies because of their absolute return potentials. Hedge funds have posted double digit returns on average to its investors in the past 15 years, according to the Nashville based VAN International advisers. While hedge fund returns have been moderate recently; they are poised once more to deliver positive returns for 2005.

Paul Oranika
Contributing Writer

HedgeCo.Net
Email: Editor@hedgeco.net

HedgeCo.Net is the most popular hedge fund database and community in the world. Membership on HedgeCo.Net is free and easy. We also offer free listings for Hedge Funds!

Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com.