As summarized in the below Business Insider article, a recent discussion on Reddit shines considerable light on what turns out to beÂ theÂ relatively mundane realities of hedge fund investment. In examining what many hedge fund managers tend to believe regarding the efficient market hypothesis (a theory which, if true, would make most hedge fund strategies impossible) and the actual strategies and tactics most commonly employed by hedge funds, three salient points emerge distinguishingÂ the winners from the losers: (1) access to information; (2) possessingÂ effective (frequently expensive) on-the-groundÂ resources capable of gathering information faster than the competion; and (3) blind luck. As boringly obvious as these conclusions may sound, the underlying economic and legal compexities at stake are still well worth pondering.
Below are links to the Business Insider summary and the original set of Reddit posts.
[“A Discussion On Reddit Contains Two Extraordinary Insights On How Hedge FundsÂ Operate And Beat The Market,” Business Insider, 9/3/2013]
[“How Do Hedge Funds Determine Where To Do Their Research, Which Securities To Pick,”] Reddit.com, 9/1/2013]