The hedge fund world got a lot more crowded in the half dozen years after I entered the industry. Elite firms such as of Moore, Tudor, Tiger, LTCM, and D.E. Shaw were joined by dozens more percolating up from the Wall Street establishment. Their clientele evolved, moving up the chain from wealthy individuals to large institutions. Hedge funds became an investment phenomenon, and as such they became subject to increased regulatory scrutiny because of their supposedly wild ways, which provided fodder for journalistic forays into greed and fraud. The reality is a bit more sober. For starters, it is hard to come up with a common feature or quality that unites the 5,000 plus hedge funds. With so much focus on them, it is worth asking what hedge funds really are. Although many outfits are branded as such, do hedge funds really exist as a definable entity? Is there such a thing as “hedgefundness”?

These are existential questions with practical import. We are in a period of mounting interest in hedge funds, interest that is backed by a growing demand for performance measurement, hedge fund indexes, and tracking portfolios, as well as for transparency and regulation. The unspoken assumption is that hedge funds are a homogeneous entity, for only in that case does it makes sense to analyze, index, and risk manage hedge funds as a class.

I believe much of what is proposed for hedge fund oversight and analysis will turn out to be a fruitless exercise because ...

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