AIMA Weakly Defends the Indefensible

Alistair Blair of Investors Chronicle provides an additional perspective on my book, The Hedge Fund Mirage, in an article out today. Mr. Blair has gone to the trouble of asking The Alternative Investment Management Association  for a response. One of their Core Objectives is, “To provide an interactive and professional forum for our membership and act as a catalyst and promoter of the industry’s global development.” You might imagine that a book noting the enormous imbalance between the results for hedge fund managers compared with their clients would command AIMA’s attention. If it has, the result must have been rather more time spent on internal discussions of damage control and rather less on quantitative analysis, at least based on their response to Mr. Blair.

AIMA’s opportunity now is to acknowledge the embarrassingly poor past economic outcomes for clients of the industry they promote, and to lead the discussion of how hedge fund investors might access the undoubted talents of many managers on far more equal terms than in the past. Will they be up to the challenge?

On August 8, 2011 Andrew Baker, CEO of AIMA, proudly noted on FTfm that, “Far from being disappointing, hedge fund performance has been impressive.” This was in response to an article by Jonathan Davis whom Mr. Baker accused of promoting “hoary old myths about the hedge fund industry.” Jonathan Davis was on to something, and Mr. Baker’s vigorous defence of his industry (albeit at odds with the facts) happily did not deflect Mr. Davis from shining a spotlight where it was sorely needed. Fortunately for investors he followed up a few months later with the pointed, “Do hedge funds offer value for their fees? No.”

Six months after Mr. Baker’s “…performance has been impressive” comment, AIMA is still avoiding a response that includes numbers and now lamely speculates that, “The main problem with Lack’s whole thesis is that no serious investor would tolerate for long a situation in which nearly all the returns were going to the manager and not them.” I think I shall start wearing AIMA’s criticisms as a badge of honor. Somebody ought to be promoting the interests of the clients – there doesn’t seem to be much competition for the job.