Video: The Evolution of Hedge Funds and the Future of Asset Management

The Milken Institute’s Global Conference, which took place earlier this month in Los Angeles, featured a discussion on the future of the hedge fund industry. While the panel may not have fully resolved the current hedge fund conundrum, the discussion was interesting nonetheless. The panel included Cliff Asness of AQR, Neil Chriss of Hutchin Hill Capital, and Steven Cohen of Point72 and was moderated by Ilana D. Weinstein, Founder and CEO, The IDW Group LLC.

Are hedge funds worth their fees? Warren Buffett recently answered that question with a resounding no. Surprisingly, Messrs. Chriss and Cohen essentially agreed with him, complaining that modern-day hedge-fund strategies are too much like indices and not differentiated enough from one another.

Mr. Asness, who has been critical of hedge funds in the past, says that they’ve actually “had a good run” over the past several years when you consider the fact that hedge funds are only about 30% exposed to stocks. His main complaint against hedge funds today is that they’re not hedged enough, even though the mainstream criticism against them may be that they’ve been too hedged during the bull market of the past 6-7 years.

The conversation also got a bit political. First, Mr. Asness complained about the increasingly onerous regulatory environment, but not on behalf of his selfish interests as founder of AQR. Indeed, Asness said regulations and compliance costs are good for AQR and other established players, but they’ve raised barriers for would-be newcomers to the field. To Asness, this stinks of “cronyism” and he doesn’t like it.

When asked about the upcoming presidential election, none of the panelists were pleased.

  • Asness responded with a verbal tweet: “#NeverAnyOfThem.”
  • Chriss said international investors have expressed their concerns to him, and that no matter who wins, the world will be relieved when it’s all over.
  • Cohen said he was “confused” and “didn’t know what to do.”

“They have a bipartisan hatred for hedge funds,” quipped Mr. Asness, in reference the presumptive Republican and Democrat nominees Donald Trump and Hillary Clinton.

Finally, the interviewer asked all three men about their early influences. Mr. Cohen said he developed his love for stocks from his grandmother and an African-American lady who watched him when his parents vacationed. Mr. Chriss, who specializes in selecting managers for multi-manager funds, said he’s always been good at organizing people and getting them to do what he wants, even as a child.

Asness said that he had no interest in stocks whatsoever as a child: “I had an interest in candy.”

Jason Seagraves contributed to this article.

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