CHAPTER 10Mounting Criticism of Hedge Fund Performance

Some investors undoubtedly have nonfinancial reasons for investing in hedge funds—for example, the ego-enhancing thrill of being a member of an exclusive club. Probably a more important nonfinancial reason is that some hedge funds are so large and well established that they have become “brand names,” much like some of the larger and better known mutual funds. However, for the majority of investors, the rationale for investing in hedge funds is that they will provide superior performance compared to mutual funds and long-only investments. Otherwise, why pay 2% management fees and 20% performance when you can pay 0.5% for a Vanguard mutual fund?

It therefore seems like a good idea to evaluate ...

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