If you’re thinking of investing in a hedge fund, perhaps the best advice anyone can give you is to read “The Emperor’s New Clothes.”
The Hans Christian Andersen tale is the perfect sendup of how so-called sophisticated people can succumb to hype and snobbery, buying into something that clearly is not there. In the case of hedge funds, many large investment decision-makers, including the managers of several large public pension funds, have cost their investors billions of dollars by swallowing the myth of hedge fund outperformance.