Herding, Hearings and Proxy Fights

Crowded trades and killing fields.

The famous line about hedge funds is that they are "a compensation scheme masquerading as an asset class," and there is some bare factual sense in which that is true. A hedge fund is just a pot of money, not registered as a mutual fund, that invests in things and pays its manager a fee. It can invest in whatever things it wants. You can have a hedge fund that just buys stocks, or a hedge fund that does capital-structure arbitrage in corporate credit, or a hedge fund that makes macro bets on currencies, or a hedge fund that just buys puts on the S&P 500 to prepare for the coming crash, or whatever. There is no obvious directional bias to "hedge funds" as a category (unlike mutual funds, which are categorically long publicly traded stocks and bonds), and part of the marketing for hedge funds, as a category, is that they attract mavericks and contrarians and lone geniuses who are too creative and original to fit in at more conventional Wall Street employers.