October Volatility: Is It Crowded In Here Or Is It Just Me?

October Volatility: Is It Crowded In Here Or Is It Just Me? by By Stan Altshuller, NOVUS

Introduction

Many investors have observed the slow, relentless decline of alpha generated by hedge fund managers. As the industry continues to grow, fewer unique opportunities for alpha exist. Those pockets of dislocation attract a large number of smart, driven managers focused on exploiting those opportunities. Multiple managers participating in similar trade ideas leads to increased illiquidity. So when it’s time to sell, it can be difficult to find buyers. What we are talking about is often referred to as crowding – too many managers and dollars chasing the same prize. This installment of our “October Volatility” series will delve into the risks introduced...