The Idea of Prediction is an Aphrodisiac

Look at the below table of Assets Under Management for the hedge fund industry (via Barclays), a figure which now approaches $3 trillion.

Screen Shot 2014-07-30 at 9.21.18 AM

You will often hear people ask “How can this be the case?”

If markets are efficient, the logic goes, shouldn’t market participants themselves be efficient? If markets are rational, should not the aggregate of the agents who make up those rational markets also be rational themselves? Much of this capital is being allocated in a highly expensive manner by these supposedly rational actors and a great deal of it is being treated to results – over long stretches of time – that do not in anyway justify the costs, opacity or aggravation. For every standout fund (and there are certainly standout funds in each category), it’s been estimated that there are four or more disappointing funds.

You would think that efficiency would prevent a lot of the wild goose chase for outperformance in this day and age – especially given how easily replicable so many of these strategies have become thanks to technology and innovation.

And yet the lottery persists. The honeypot calls and investors heed that call, over and over again.

Here’s one explanation for the disconnect…



hedge 2 hedge 3


Cartoon from The Nib via Patrick Kilgore

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. victor commented on Dec 10



  2. Kirk commented on Dec 17



  3. luther commented on Dec 17


    thank you!!

  4. Evan commented on Feb 07



  5. claude commented on Feb 11


    ñýíêñ çà èíôó!!

  6. watches international replica commented on Sep 18

    … [Trackback]

    […] Here you can find 57387 additional Information to that Topic: […]

  7. rolex knockoff commented on Sep 18

    … [Trackback]

    […] There you can find 23521 more Information on that Topic: […]

  8. bitcoin evolution commented on Oct 01

    … [Trackback]

    […] Info on that Topic: […]

  9. replica watch commented on Dec 21

    … [Trackback]

    […] Here you will find 74991 additional Information to that Topic: […]

  10. Software Testing Company commented on Jan 16

    … [Trackback]

    […] Information to that Topic: […]

  11. Regression testing commented on Jan 16

    … [Trackback]

    […] Read More Information here on that Topic: […]

  12. Digital Transformation commented on Jan 16

    … [Trackback]

    […] Find More on to that Topic: […]

  13. RCA Subwoofers manuals commented on Jan 24

    … [Trackback]

    […] Here you can find 48007 more Information on that Topic: […]