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How the Hedge-Fund Industry Came About

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The hedge-fund industry grew up by preying on the inefficiencies created by the mutual-fund mentality of only departing from a benchmark index weighting with reluctance. Events that transform companies can complicate things when you're focused on, say, having an 8% weighting in industrials. That's why these types of companies can often be mispriced. There's also change going on and the market can be remarkably slow in shifting its focus from how things have been to how they will be.
Source: http://www.valueinvestorinsight.com/