WORLDVIEW: Case against Hedge Funds – this time from academics, not Buffett

Capitalism works best when information flows most freely. Under such conditions, its powerful self-regulator kicks in, attracting new players to areas where excessive profits are generated and punishing those who under-deliver. Given that they are exposed in both areas, it's no surprise hedge funds are being pummelled.

Nine years back Warren Buffett famously put down $500,000 of his own money when he offered it in a bet against any hedge fund which believed it could beat the S&P500 index. With only months left, the hedgies who took the bait have taken a pasting. Here's another nail in the once flourishing hedge fund coffin, courtesy of academic research uncovered by my Biznews colleague Jackie Cameron.

Jackie writes: "As a personal finance journalist, I'm constantly on the lookout for fresh ideas for money stories. One of my favourite hunting places is in academic research, where innocuous sounding papers can conceal the most interesting investment revelations – though it may take some work to decipher the technical details.

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