Very interesting, David. Nomura's conclusion is consistent with the study published by Griffin & Xu (http://www.jgriffin.info/Research/smart.pdf), who concluded that "overall, our study raises serious questions about the perceived superior skill of hedge fund managers." Griffin & Xu used 13F forms to identify long hedge fund stock positions, and compared them with mutual funds. "These findings indicate that hedge fund holdings and trading are not adding value on average. ... In terms of stock picking, there is some weak evidence that hedge funds outperform mutual funds on a value-weighted basis, but these superior returns are largely concentrated in the high price-to-sales (technology) sector in 1999 and 2000. ... Hedge funds exhibit no ability to rotate capital among different asset styles at opportune times and their average style selection slightly underperforms mutual funds. ... Overall, we find that hedge funds seem to be no better at long-equity investment than mutual funds. Given that hedge funds generate higher turnover and trade in less liquid securities, our performance comparisons would look even worse if transaction costs were included. Back-of-the-envelope calculations using a standard hedge fund fee structure suggest that hedge funds are a worse vehicle than mutual funds over our sample period. ... We predict that as data quality improves, more studies will begin to question the wisdom of hedge fund invesment."
I should disclose, by the way, that I have been a tiny investor in CP Rail and therefore have benefited from Ackman's activism in that company.