Mr Market is something of an admirer of Lord Byron. Indeed, he is an avid avower of his own Byronic stature, keenly pressing his Romantic credentials to anyone who will listen. While Mr Market may not know any Byronic poetry, he is still very keen on the idea of riding a horse bareback across Italian sands, long hair billowing in the winds, and will not let anyone take that dream away from him. Similarly, he is very fond of the story of the university steward, who, upon entering the young Lord Byron’s digs, found himself confronted by a pet bear.
“Ah!” Mr Market exclaims in childlike delight, “I too am in possession of such a bear!” Yes, in true Romantic fashion, Mr Market is talking about his bearish attitude toward the hedge fund model. This week, pension fund CalPERS – one of the world’s biggest – declared it was abandoning hedge fund investments due to their complexity and cost. The only thing strange about this is why it has taken so long to do so. Almost every hedge fund actually underperforms the market, and, after any given five year period, only one-third of hedge funds are still around to tell the tale. Couple this with a two per cent annual commission, plus 20 per cent of any returns over six per cent, and you have something even Mr Market, pulling deeply from his hookah, would blanch at.