Stories like this (reg. required, free) have been flying off the presses the last week or so. And these guys weren't poor flunkies getting whacked by the GM/Ford debt debacle a few months ago. Just poor flunkies doing a horrible job picking stocks.

And to think these guys were feted as the best new hedge fund in 2004. It goes to show how circumstances can change in an instant. It also points up the problems that can be encountered when managers start believing their own press clippings. The market has a profound way of humbling 99.9% of all comers. Hey, if we could all be like Bruce Kovner the payoff wouldn't be as lucrative.

Hedge funds, while being sliced and diced so they can be peddled to seemingly anyone with a heartbeat, is an area that required tremendous due diligence. If you are involved or thinking about it, you really have to to the homework to know who is investing your money and how. This is still a very, very gray area even with the roll out of "fund of hedge funds."

And even after you work through the questions on manager competence, you are still left with fee structure. Hedge funds can be grossly expensive, and adding in another fee layer for a "fund" jacks up costs even higher.

It has been said hedge funds are really just a compensation model for the managers. Buyer beware, very aware!