“Free lunches” still popular in Hedgistan
| Jun 30th, 2010 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post | By: Alpha Male |
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As they say, the only free lunch is diversification. However, recent events have led many to wonder if the free lunch is only served on certain days of the week. Proponents of “high conviction” funds often argue that “deworseification” only serves to ensure that any out performance from active management is drowned out by falling markets.
As the quintessential purveyors of active management, you’d expect hedge funds to subscribe to this particular philosophy. By removing investment constraints, it is thought, hedge fund managers are able to ply the waters of one or two very specific niches. However, a new paper by Hany Shawky and Na Dai of SUNY Albany (see related posts) and Douglas Cumming of Canada’s York University (see related posts) shows that hedge fund managers are actually quite diversified (by style, sector, geography and asset class).
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