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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (5473)	7/1/2001 7:23:06 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

But we should learn to love the ingredient mixer, for they "... hedge funds do not attempt to buck the market. They just try to pre-empt it, and in so doing enhance liquidity and increase market efficiency" QUOTE Lex: Hedge funds Published: July 1 2001 19:35GMT \| Last Updated: July 1 2001 19:37GMT Hedge funds are hot. In a nervous investment environment, nearly $7bn flowed into hedge funds in the first quarter of 2001 - almost as much as in the whole of 2000. Calpers is planning to put up to $5bn of its assets into hedge funds. There are estimated to be approximately 5,000 hedge funds managing $300 billion worldwide. Hedge funds have a number of advantages over mutual funds. They can leverage, invest more flexibly and take short positions - and, hence, profit from picking losers in bear markets. But their rapid growth raises several questions. Increased competition puts downward pressure on fund returns as more people chase the same opportunities. And big is not necessarily better. Smaller funds may outperform bigger ones because it is easier for them to identify investment opportunities with sufficient liquidity for swift entry and exit. And leveraged bets do not always pay off: GE/Honeywell has been a disaster for some funds. Arbitrageurs are frequently accused of disrupting markets. CEOs have started to worry about how to deal with such short-term, apparently faceless shareholders. But hedge funds do not attempt to buck the market. They just try to pre-empt it, and in so doing enhance liquidity and increase market efficiency. Executives should resist the temptation to "blame the arbs" and concentrate on creating shareholder value. UNQUOTE

To: TobagoJack who wrote (5473)	7/1/2001 7:48:09 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 74559

I think its a mistake also, Jay. OTOH, 100 million to Calpers is truly chicken feed (somenthing like 0.2% of invested assets). 5 billion would be a big mistake, IMO. They may find out that "investing" in hedge funds isn't the best strategy in a prolonged bear (of course, it depends VERY heavily on WHICH hedge funds they gamble, err, INVEST with).