Sharing in investing world is not welcome

Hedge fund managers started to accumulating MasterCard since 2010 as a common popular investment. Since then, MA has been doubled. These hedge funds crowded into the same investment attracted regulators' attention and higher volatility worries. Such synchronous trades would magnify market swings that would trap into smaller from distorted prices.

Reasons that funds have same trades include many of them use similar economic models to formulae trades and lagging managers switch their holdings to leading rivals. In addition to trading philosophy, fund managers get trading idea for "idea dinners" when they share their ideas. The latter can be treated as market manipulation by regulators. Studies by Andrew Lo, the MIT professor and fund manager, showed that hedge funds are moving up and down with much higher correlation. This is not fair to their investors who pay hefty fees to managers who just mimic their rival's portfolio. No one wants to pay their dinner just to see they are working together.

However, fund managers have good reasons to share ideas that justify their own thinking from criticism. It sounds ambiguous though that caused the Justice Department conducted a two-year investigation on whether hedge funds banded together for market manipulation. But the investigation went nowhere. Daniel Loeb, the fund manager who drove out Yahoo's CEO last month, was the one been investigated. After the investigation dropped, Loeb announced that he would stop sharing ideas with other managers.

The main challenge to confirm market manipulation is prove fraudulent intent, which is almost impossible to prove. But in any cases, sharing ideas is still not welcome in the investing world.