Bet 740

Duration 3 years (02017-02019)

“75% drop in the assets of pure Fundamental Long-Short Equity Hedge Funds by September 2019. These assets will transition to quantimental investing, smart beta products, statistical arbitrage funds, long only concentrated funds, event driven funds, etc”

Anirudh Chowdhry


Chowdhry's Argument

  1. Significant underperformance of long-short hedge funds relative to the indices over the last three years
  2. No changes in the fee structure of long –short managers despite this underperformance
  3. Availability of alternative products ( smart beta, risk premia harvesting, hedge fund replication strategies, ETFs) providing similar return stream at a lower fees
  4. Proliferation of passive investment products increasing correlations and tempering the impact of diversification across securities
  5. Burgeoning susceptibility of equities to macro-based news relative to firm-specific news
  6. Technology evolution increasing the efficiency of financial markets to process information-truncating the potency of fundamental and ubiquitous variables (like changes in dividends) to forecast the intrinsic value of an asset
  7. Growing realization among institutional investors that underwhelming performance triggers replacement of hedge fund managers

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