AIMA's Weak Arguments Draw Unfavorable Scrutiny

A few weeks ago the London-based Alternative Investment Management Association (AIMA) issued a “comprehensive rebuttal” of my book, The Hedge Fund Mirage. AIMA’s mission is to promote the hedge fund industry, so one might anticipate a breathless endorsement of their paymasters, and in this they did not disappoint.

I didn’t bother commenting on their report because it didn’t receive any mainstream financial press coverage. Few serious journalists took them seriously. And in any case, AIMA’s clients (i.e. hedge funds) have (unfortunately for their clients) been helpfully providing further empirical support for my assertion that $2 trillion in AUM is more than they can usefully manage by generating consistently mediocre results at great expense.

But Jonathan Ford in today’s FT rightly questions whether the hedge fund industry as a whole is over capitalized. Mr. Ford is providing a far more useful perspective for consideration by those pension funds cramming ever more assets into hedge funds than the industry’s increasingly ineffective and far from impartial lobbyists.

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1 reply
  1. nick gogerty (@nickgogerty)
    nick gogerty (@nickgogerty) says:

    AIMA’s case looks pretty weak. Maybe the Scaramucci can help them out 😉 I don’t think either offers much help to the industry. The problem reflects a rational economic outcome for the participants (real alpha generators and free riders).

    It isn’t surprising hedge funds came to this. Any successful strategy will have imitators or pretenders chasing the fees who will ultimately pollute the returns of the aggregate group. It is a natural process, kind of like species in nature who feign the look of poisonous animals to be left alone without bearing the cost of developing the poison gland.

    The pretenders will always evolve into the ecosystem, to the degree to which they marginally diminish the efficacy of the “real deal” in aggregate to barely functional.

    The fund industry will likely be the same with a sub-marginal returns in aggregate reflecting authentic alpha and negative alpha as a game of talent and pretenders with marginal attractive qualities.


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