Mass media is increasing its focus on hedge funds. Hedge Funds for Dummies hits the bookstore. Is there any evidence that Dummies books predict market tops? However it is often said that hedge funds are not an asset class but a compensation scheme. Therefore there is no way to burst a bubble. There will always be a market for intermediaries who can manage money. One clue to how hedge funds gain an edge is by doing lots of research with boutique shops. Analysts can use what is called the mosaic method to put together lots of pieces of evidence to create proprietary information. Does this fall into the realm of insider trading? Mostly not, but as in any endeavor, people will find a way to cloak illegal activity in normal routines if there is a way to profit.
Oh, and by the way, according to Kat you can cheaply replicate hedge fund performance without the fees.
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