Tuesday, January 23, 2007

FT -- "Long-only is the new black in quest for ‘alpha’" (James Altucher's column)

The best for last. Hedge funds trending to 'long-only' strategies? Say again? Again with a few quotes....

"In the past three weeks I had two funds of hedge funds and one $10bn family office based in Geneva call me and essentially say the exact same thing: We’re starting to look at long-only hedge funds. 'We’re tired of paying management fees to people who are guaranteed to lose money over time,'" Huh?

And, one to chew on for a bit,

“Long-only” is the new black. What’s the basic idea and is it a bearish sign on the markets if suddenly everyone cares about only going long? First off, it’s not bearish at all. It’s smart. It’s very difficult to create alpha from shorting. In other words, when someone invests in a skilled shortseller they are hoping for two things: 1) when the markets are down the shortseller is up, and 2) when the markets are up, the shortseller is not down as much as the markets are up. This last condition is the “alpha”. But here’s the problem: 99 per cent of shortsellers are incapable of doing it.

FT.com / Wealth - Long-only is the new black in quest for ‘alpha’

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