But were they one-hit wonders? Maybe. But having the courage of your convictions in the face of extreme doubt from clients, partners and friends, as Paulson and some others did, isn't something many money managers could sustain. So give credit where it's due.
There are signs that investors have wised up to the game of chasing alpha. Flows to hedge funds and other less liquid investments are slowing. A senior Blackstone Group executive on Wednesday said hedge funds might lose as much as a quarter of their assets. Consultants are being called to task for their role in steering investors to underperforming, high-fee alternative investments. Research has shown that financial consultants add no value through their selection of investment managers.
Understanding the costs of pursuing alpha, and how genuinely rare it has become, may very well determine what the next decade of capital flows look like.
Me? I’ll stick with beta.