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Why hedgies attract investors/ Why 60% still vote PAP

In Financial competency on 13/03/2015 at 1:03 pm

Same reasoning applies: Appealing to greedy but gullible people works?

HEDGE FUNDS KEEP ATTRACTING CASH Hedge funds have underperformed a simple blend of index funds 60 percent stocks and 40 percent bonds for three-, five- and 10-year periods, but the lure of higher returns with lower risk ‒ or even zero risk ‒ continues to beckon, James B. Stewart writes in the Common Sense column. Large investors added $1 billion during January and more than $88 billion in 2014, according to data compiled by the investment consultancy eVestment. Total hedge fund assets are now more than $3 trillion.

Painful memories of the financial crisis and the persistent low interest rate environment may be driving investor interest, said Peter Laurelli, vice president for research at eVestment. Many funds promise to address both issues by blunting the impact of another market crash while generating higher returns than United States Treasury bonds. “Institutions are not only pouring more money into hedge funds, but they also appear to be engaging in a classic pattern of many individual investors, which is to chase returns and shun losers,” Mr. Stewart writes.

He adds: “Of course, how today’s ever-growing universe of hedge funds will perform in the next crisis remains to be seen. Unlike United States stocks and bonds, they are lightly regulated. They aren’t that transparent. Many aren’t that liquid.”

NYT Dealbook

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