Crowded Trades Among Hedge Fund Managers Growing Issue

Crowded trades are becoming a problem for hedge fund managers, notes Novus Chief Research Officer Stanley Altshuller, a thought reinforced by a Morgan Stanley hedge fund research report.

Altshuller tells the story of a well known hedge fund that told him when an equities analyst pitched a great idea to his portfolio manager he was rejected even though the thesis was compelling. The reason? “Everyone else is in that name,” Altshuller wrote in a blog post.  And such tales seem to be happening more and more these days.

“Currently, there is a real aversion and outright avoidance of crowded situations developing in the investment management world,” Altshuller notes, then wonders why a good...