Cape Cod Times- The growing and lightly regulated hedge fund industry is attracting new players  business school professors eager to test their theories in a field known for big risks andoccasionally bigger rewards.
Hedge funds are becoming a tempting tool for faculty members looking to sharpen research and giving a Wall Street perspective to their students, all while making some extra money.
“MBAs and, to a less extent, Ph.D.s have taken over the financial world,” said Roger Ibbotson, a professor at the Yale University School of Management and co-founder of a hedge fund. “What we study is what people in finance know and use.”
Hedge funds are a $1.1 trillion industry, largely unregulated and traditionally used by institutions and wealthy investors. Hedge funds profit by using unconventional techniques, such as short-selling, or betting on falling markets to make a profit during market downturns. They typically are active traders and can use techniques off limits to mutual funds.
While hedge funds frequently outperform more traditional investments, some have failed spectacularly. Last year, Connecticut-based Amaranth Advisors wrongly guessed that tropical storms in the Gulf of Mexico would cause natural gas prices to spike. The storms didn’t develop and Amarath lost billions within a week, prompting lawsuits and congressional hearings.
