“I’m pretty cynical about transparency. Part of the reason why hedge funds haven’t offered this transparency is because of how simple their strategies are.” He said this awareness of hedge fund return sources were broadly known before the financial crisis but investors did not negotiate for lower fee deals because returns were so strong. Managers also held the balance of power because their services were in demand. But the crash of 2008 brought these return concerns to the fore.

Another consideration for investors is the impact that increasing FUM has on investment performance. A manager exercising true alpha “just can’t keep doubling the money” in their strategies, Asness said. “You can’t go from $1 billion to $1 trillion and still claim to have the same percentage of alpha.” “Hedge funds have pursued these strategies for as long as the data shows us. That’s not new. What’s new is that hedge funds are putting much more capital into them.”