[jyl]

The hedge fund business is somewhat odd. I know lots of people at hedge funds. Their average time at each job is about 2 years. Supposedly their moves are never due to poor performance, how credible do you think that is?

When hedge funds started to take off, about 10 years ago, the hedge funds were small and nimble and could play against the herd, aka the big institutional and mutual long-only funds.

Now hedge funds, and prop desks, and high-speed traders, dominate the trading volume. The hedge funds are playing against each other, they are the herd in trading volume terms. When you check the top holders of the types of stocks that are hedge fund long favorites, you'll often see 3 or 4 hedge funds in the top 10 holders. When a stock becomes a favorite short of the hedgies, you'll see short interest equal to >10 days trading volume, which means very crowded shorts. When the hedge funds are crowded together like that, their opportunities for profit are diminished.

I've read some finance journal articles which purport to show that you can approximately replicate the average hedge fund performance (these are long-short equity funds) using long-only mutual funds and short index positions, at far lower cost.