Are hedge funds good for you?

July 01, 2011  

Scandals aside, there are many positive attributes to an industry that gets beaten up by just about everyone

By Kit R. Roane  

  Illustrations by Brian Cronin
Raj Rajaratnam ran what might be described most delicately as an outlier strategy: trading on insider information, which is not only illegal but impossible to pull off consistently year after year. And in terms of wooing coveted investors, even the most desperate endowment or pension fund would find it a difficult strategy to embrace.

With several other hedge fund managers and traders ensnared in the insider trading scandal, Rajaratnam’s Galleon Group epitomizes hedge funds as far as the greater public is concerned—sitting with Bernard Madoff, Amaranth Advisors and Long-Term Capital Management in the hedge fund industry’s hall of shame. It doesn’t appear to be the end of the bad news either. The Securities and Exchange Commission and congressional investigators—now reportedly focusing on trades made at SAC Capital Advisors—seem to be gaining steam every day....


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