Every hedge fund guy I know constantly stresses about the overall lack of alpha generation in the industry right now. To say thet the point of hedge funds is to avoid taxes is just ridiculous. A company doesn't need to invest in a hedge fund to engineer the type short-term losses and long-term gains. And there's no reason they would, the fees are simply too high for anyone to ever do that.
Why hasn't competition brought the fees down when hedge funds aren't consistently beating the market?
Fees have gone down in the past couple years, Tudor slashed their fees from 3 and 30 (which is ridiculous) to 25 and 2.25 (still kinda high). Many other hedge funds have gone to 15 and 1.5.
The problem with hedge funds at the moment isn't that they are making bad security choices individually, but that taken together, a short list of securities becomes very crowded, which really hurts liquidity (though this crowding isn't calculated in their liquidity metrics, so they think they have liquidity even though they really don't)
