Sydney Morning Herald- For the past decade, its explosive growth has been based on a simple claim: that skilled money managers, motivated by high performance fees, could outperform the market when it was going up – and sidestep the trouble when it was going down.
And yet the credit crunch has shown that to be a myth. Although a few hedge-fund managers have done brilliantly, far more have come unstuck.
Now it looks as if the industry might be based on a more systematic falsehood. Two recent academic studies suggest that hedge funds have been routinely dishonest, or at least economical with the truth.
If that’s right, then it is worrying for alternative-asset managers. As the idea gets out that hedge funds can’t deliver the kind of guaranteed returns they promised, a lot of money is heading for the door marked exit.
