Download Morgan Creek whitepaper: The truth about hedge funds
Michael Hennessey from Morgan Creek Capital Management discusses ‘the truth about hedge funds: separating fact from fiction in an information-saturated world’…
Media coverage (in both the popular and financial press) of financial institutions has been very negative in recent years. In Morgan Creek’s view hedge funds, in particular, have made for an easy target in the press, even before the Great Financial Crisis of 2008. The negativity only increased with the advent of the crisis, picking up steam on the new political wave that swept the 2008 elections, which were in part a jutifiable reproach of the egregious abuses of ‘Wall Street’. This coincided with the fall of Bernie Madoff, who committed the greatest financial fraud in history (but who, contrary to some press reports, did not run a hedge fund). All of this, finally, culminated in the greatest financial and economic crisis of anyone’s working lifetime. Almost any entity connected with the industry was vilified, and understandable so.
However, many of the rampant criticisms of the hedge fund industry that have appeared in various financial and popular media sources are only loosely based in reality and reason. In this piece, Michael Hennessey from Morgan Creek, will examine a recent example of hedge fund criticism that appeared in the Wall Street Journal. The January 14 article, headlined”Pack Mentality Grips Hedge Funds,” makes the blanket statement that “hedge funds,” now lagging in a bullish environment, are crowding into the same trades, thus causing volatitlity, distorting prices and making it more difficult for fundamental investors. It is Morgan Creek’s view, however, that this generalization misrepresents both the purpose and practice of the vast majority of hedge funds today.
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