Hedge funds have turned fat, lazy

When the Securities and Exchange Commission made clear its intention to impose registration and financial reporting demands on most hedge funds, critics accused the government of trying to fix something that wasn't broken. If the SEC had truly been concerned about protecting hedge fund investors, it would have mandated that all hedge funds reinstate two things that have been conspicuously absent for some time now: volatility and real returns. The looming presence of institutional money in the hedge fund universe has significantly affected strategy. Institutions have habitually preferred safety - when did hedge funds find their way into the "safe" asset class - and predictable returns, guaranteeing mediocrity. These preferences hamper the ability of hedge fund "asset gatherers" to take bets that could result in volatile but significantly higher returns.