I am a spectator of Wall Street happenings maybe due to the brief stint in corporate finance as an MBA intern, selling software to these firms, or just the sheer amount of entertaining, exciting, and sometimes terrifying news that comes out of capital markets.  I won’t rehash all the ills and spills related to sub-prime mortgages, CDOs, leveraged positions, poor oversight, Bear Stearns, Goldman’s Alpha and North American Equity Opportunities funds, or even today’s BNP revelations, but do have a rather simple question about the purpose of a "hedge fund."  From our friends at Wikipedia, I submit the following:

"They often hedge their investments against adverse moves in equity and other markets, because a common objective is to generate returns that are not closely correlated to those of the broader financial markets.
"

Hmmm…adverse moves?  Like we have been having?

As I understand it, what you get for your 2-3% management fee plus giving up 20% of your profits is a flexible investment vehicle (with light regulation) that can invest across a variety of asset classes both long and short all the while HEDGING against risk and the possibility of big losses.  It seems to me that a true hedge fund (or one worth that kind of fee structure) would have been prepared for the recent happenings and come out on top.  Here’s one such fund that bet correctly on the subprime mess and is up 240% – Hayman Capital Partners.  Managing Partner Kyle Bass’ recent letter to investors is an interesting and scary read.