Hedge Fund Reader : Hedge Funds being blamed for Wall Street's inadequacies

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July 31, 2005

Hedge Funds being blamed for Wall Street's inadequacies

Here is one for defending the Hedge Fund industry. Dr. Joe Scifers who is a hedge fund manager and investment newsletter publisher recently made his opinion about the financial industry loud and clear. He said that investors have been repeatedly been made to believe that the returns from market will be low as all the strategies that had to be explored and all the moves that the financial industry had to make have been made. He blamed the Wall Street for creating the mindset of accepting low returns. He says that people often overlook the fact that stock market is still the best investment tool. Elaborating on this, he remarked that from 1986 to 2002, the S&P 500 has averaged 12.2% per year indicating that despite the catastrophes that have shaken the world the stock market still performs. He added that hedge funds have been repeatedly been wrongly blamed for creating chaos in the investment industry. Coming to the defense of the fund managers, he said that the fund managers work hard for earning. They are suitably rewarded for their performance by way of performance fee. This incentive is however lacking for mutual fund and other investors and therefore the dismal returns that the investors have to live with. Hedgeco.net reports:

“Scifers believe that hedge funds work because their managers have the incentive to perform, and they receive incentive fees because they earned them. On the other hand, well performing traditional investment managers are not compensated in line with their achievements he explained”

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July 31, 2005 in Research | Permalink