Will weight of money push down alpha returns?

Hedge funds

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Reports of overcapacity and a drying up of arbitrage opportunities continue to blight the hedge fund industry. In October, JP Morgan released a much read and commented on report entitled Have hedge funds eroded market opportunities? Other reports, notably from investment management company Bridgewater Associates, suggest many hedge funds are failing to generate any alpha and are instead “packaging up beta and selling it at alpha prices” (see box).

JP Morgan says that as hedge funds grow larger th

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