Despite the promise of high profit margins in a business that is growing like wildfire, why are some traditional advisory firms steering clear of alternative investments?
Some traditional firms believe that hedge funds are nothing but a fad, and that they are not established enough to be considered a legitimate investing vehicle. Others feel that overcrowding in many strategies will reduce future returns, a trend that has been in place over the last two years. Some say that enhanced regulatory scrutiny of hedge funds will make the business much more expensive, especially for the larger players.
Those risks aside, the firms that are staying out of the alternative investment industry are betting that conventional ways of investing money will continue in the future–a belief that dangerously overstates the success of active, long-only investing.