Here's an article in the WSJ addressing whether or not hedge funds are being unfairly blamed for roiling the markets.
Royal Air Force pilots have long blamed gremlins for technical foul-ups; in a way, it's easier on morale to blame mythical creatures than to seek out the real culprit. Today, when things go wrong in markets, Wall Street has its own version of the gremlin: the mysterious hedge fund, believed to be roiling everything from the Dow industrials to the oil market.Like the RAF gremlin, it's a myth.
Not hedge funds themselves, of course: They really do exist. But they're just too small to be all that disruptive. While the hedge-fund industry manages nearly $1 trillion -- a scary-sounding number, to be sure -- that's chump change compared to the $12.74 trillion managed by mutual funds (excluding money market funds), according to the latest ICI data. For hedge funds to make a noticeable splash in a broad, liquid market, they'd have to do an awful lot of coordinated, heavy lifting. "That's not likely," says Justin Dew, senior hedge-fund specialist at Standard & Poor's. "People overestimate the tendency of hedge fund managers to travel in packs. The largest and most successful are independent thinkers and do very different things." [read the entire article...]
Yep, it's always somebody else's fault.