Even Man Group Can't Get It Right

I entertained myself recently by attending an investment conference here in San Francisco.  Some dude from a feeder fund for hedge funds introduced himself to me by asking, "So, you're saying you'd pay a premium for a manager who can outperform?"  I smirked and told him "yes" then specified that my premium would be precisely zero.  It is a waste of effort to seek out managers who may outperform in the short term because their returns invariably revert to a mean over the long term, so paying them any premium at all is a waste of money.  That premium is the reason hedge funds actually underperform a passive indexed investment. 

More hedge fund investors are now finding this out the hard way.  Man Group, one of the world's largest agglomerator of hedge funds, has lost 25% of its value as its investors have begun redeeming their investments.  Even leading hedge funds can't get it right.  Gee, that's just too bad.  All of those whiz-bang models couldn't beat market benchmarks after all.  Portfolio management skill is so genetically rare that those few people who do possess it - Warren Buffett of course comes to mind - happen to also be innovators whose wisdom is widely available for free. 

No hedge fund will ever get my money.