Too Late To Invest In Hedge Funds?

Date: Wednesday, January 24, 2007

The way Harold Bradley sees it, the best time to invest in hedge funds has long past. In an interview with Investorís Business Daily, Bradley, who retired as chief investment officer at American Century Investments on Jan.12, said "A great time to do it was 1999." Long considered one of the strongest advocates of individual shareholders in the mutual fund industry, Bradley advises investors to seek out fund groups that keep their trading costs low and warns investors about investing in hedge funds, which he says today are overvalued just like stocks past their prime. "With institutional money flooding in," he said, "hedge funds have taken on huge risks to boost returns," pointing to Amaranth Advisors as an example of what can happen when that occurs. Bradley, who starts Feb. 1 as CIO at the Ewing Marion Kauffman Foundation, has two words for Nicholas Mauonis, founder of Amaranth, who reportedly is eager to raise money at a new try in the field: "Itís nuts." It may be tough to argue with him; according to figures from Morningstar and Greenwich Alternative Investments, stock mutual funds have outperformed stock hedge funds over one year (15% vs. 12.3%) and three-year periods (12.5% vs.10.5%). However, over the most recent five-year periods, the hedge version came out ahead, slightly less than 10% vs. 8.5%.