80% of Hedge Fund Managers Never Knew What the Word "Hedge" Meant

[bidask]

Study shows upwards of 80% of hedge fund employees never actually knew what the word “hedge” meant

Chicago, IL—A recent study conducted by the Gallop Group showed that of 5,000 hedge fund employees surveyed during 2006-2007, 83% of respondents were unable to correctly define the word “hedge.”

“It’s just like, you know, part of the title” said one trader confidently. “Another way of saying ‘badass’ fund or ‘rockstar’ fund.” “My Range Rover is hedge,” he insisted, as if to corroborate. Other responses were equally absurd, ranging from “a Greek word” to “some Jewish dude’s last name.”

When told that hedging involved systematically eliminating risk, most subjects just stared ahead blankly. Others checked the time. Several respondents were able to eventually grasp the concept, but they found it quite novel. “Ohhh…you mean that…” said the portfolio manager of a $500M fund, as if a light bulb had gone off inside his head. He then added: “Yeah, we didn’t do that shit at all.”

http://www.leveragedsellout.com/200...ever-actually-knew-what-the-word-hedge-meant/

lol is this for real?

 

[pdthurts]

I met a guy on Google finance discussion board who was holding highly leveraged bull and bear combo (FAS+FAZ) worth $120K.

He was saying that he can sleep well because he was hedged. He must be one of those 80% ;-)

 

[nazzdack]

Quote from bidask:
83% of respondents were unable to......

Part of the "problem" is that 83% or more of hedge fund managers come from a mutual fund background. They were trying to generate mutual fund "performance" in exchange for hedge fund compensation. Oh well.

 

[marketsurfer]

the term hedge fund is from the investors perspective. it has nothing to with what the fund does. investors use the fund to "hedge" their other holdings, hence " hedge fund".

surf

 

[SCI new york]

Quote from marketsurfer:

the term hedge fund is from the investors perspective. it has nothing to with what the fund does. investors use the fund to "hedge" their other holdings, hence " hedge fund".

surf

wrong.

you must be part of that 83%

 

[marketsurfer]

Quote from SCI new york:

wrong.

you must be part of that 83%

really?

 

[Pekelo]

Quote from marketsurfer:

the term hedge fund is from the investors perspective.

My ass:

"As the name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term "hedge fund" has come to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other "hedging" methods to increase rather than reduce risk, with the expectation of increasing return."

http://en.wikipedia.org/wiki/Hedge_fund

 

[cubsguy81]

Hedge Funds have become glorified trading floors with discretionary traders and black boxes alike employing many strategies, often unrelated to any larger strategy.

Extraction of as much money as possible from the market is the strategy while not risking their own capital.

 

[Builder17]

haha, nah this isnt real, that guy (Leveraged Sell Out) satirizes the finance industry. I read his book a couple months ago, pretty funny. You should check out the video they made between Bankers and Consultants.

 

[MandelbrotSet]

Quote from marketsurfer:

the term hedge fund is from the investors perspective. it has nothing to with what the fund does. investors use the fund to "hedge" their other holdings, hence " hedge fund".

surf

Quote from Pekelo:

My ass:

"As the name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term "hedge fund" has come to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other "hedging" methods to increase rather than reduce risk, with the expectation of increasing return."

http://en.wikipedia.org/wiki/Hedge_fund

Thanks for the post Pekelo.

Marketsufer works in the industry, so while it would be assumed that he actually knows what a hedge fund is, it appears that he does not.

Scary :eek: