The Spirtual Status of Skimming Off The Top

Ah, I believe we would have here our wanker of the day. I also note that 1)the money made by hedge fund managers is clearly compensation not capital gains, and 2)taxing capital gains at lower rates is stupid anyway. Oh, and hedge funds are on average irrational investments:

With the help of a graduate student, Helder Palaro, Kat also undertook a larger study, in which he examined more than nineteen hundred funds. The results, which Kat and Palaro posted online as a working paper last year, showed that only eighteen per cent of the funds outperformed their benchmarks, and returns even at the most successful funds tended to decline over time. “Our research has shown that in at least eighty per cent of cases the after-fee alpha for hedge funds is negative,” Kat told me. “They are charging more than they are adding. I’m not saying they don’t have skill; I’m just saying they don’t have enough skill to make up for two and twenty [hedge fund managers get 2% of the investment and 20% of profits].”

When you consider that hedge funds are also much riskier than the typical investment fund, that’s pretty awful. But it’s not surprising; the more hedge funds the are, the fewer opportunities for successful arbitrage.