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While
mutual fund complexes are often
giant organizations with their
own hierarchy and bureaucracy,
most hedge funds operate more
efficiently with staffs of only
a dozen or so people.
Since the large institutions pursue
safety and avoid controversy,
bureaucratic structures systematically
screen out the market opportunities
likely to yield superior return.
Bureaucracies deal poorly with
the constantly changing market
environment, failing to address
even elementary active investment
management problems.
Small independent firms with excellent
people that focus on a well-defined
market segment provide the highest
likelihood of identifying the
intelligent contrarian path necessary
to achieve excellent investment
results. When a star manager leaves
a high paying mutual fund job,
it's often to set up shop as a
hedge fund. On Wall Street the
"talent flight" from
big investment firms to up-start
hedge funds happens every day;
yet there's very little, if any,
flow of people going in the other
direction - it's the chance to
be rewarded based on results. |
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