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The Inner Child of Hedge Funds


Good works and 5 specific stock picks.

MINYANVILLE ORIGINAL I don't really care all that much for hedge funds. While the world has gone gaga over them, they've only struck amusement in me. In fact, I don't even see hedge funds as an asset class per se. To me, they're more of a fee structure than anything else.

Mind you, some of my friends are hedge fund managers. And in what I would call a brain drain on our economy, some of the smartest people I know work at hedge funds. Accordingly, when they share their views on the market (as you will see below) I listen, and I think others should listen, too.

However, the way in which I was privileged to learn these views is noteworthy and bears telling, since it's a bright spot in the reputation of an industry that could use a little burnishing. Once a year, the industry bands together in something called Trading Day for Kids, a one-day fundraising event that provides a vehicle for hedge fund and other institutional investors to improve the lives of at-risk children and youth in New York City. Specifically, on October 25, the hedge fund community will do all their trading, en masse, through one broker – this year, it will be Canaccord Genuity – that in turn will donate all of the commissions to Youth, I.N.C., which is a sort of uber charity that redistributes the funds to some really terrific non-profits throughout the city.

My only complaint: I wish this would happen more than once a year. Regardless, if you have influence over a hedge fund, use it for the greater good on October 25.

To drum up support for Trading Day for Kids, three of the industry's most celebrated denizens -- Steve Einhorn, vice chairman and portfolio manager for Omega Advisors; Harvey Eisen, chairman of Oak Advisors; and Michael Novogratz, a principal with Fortress Investment Group -- appeared at a Canaccord Genuity-sponsored panel for investors and journalists.

To cut to the chase, all three investors are bullish for next year, and bullish long term. Though they got there in different ways, at the core of their opinion was a belief that QE III will ultimately lift the prices of equities.

Mind you, no one endorsed QE III as a good way to jump-start the economy. Their reasoning stemmed more from the belief that QE III made the economics of pension fund investing unsustainable, and that a lot of money would ultimately migrate from fixed income into equities.

This flow is anything but small potatoes. Currently pension funds are the stewards of some $10 trillion in retirement fund assets. By comparison, the aggregate market capitalization of NYSE equities is approximately $15 trillion. The math is compelling.
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