Chamath Palihapitiya Says WallStreetBets Traders Can Do Same Fundamental Analysis As Hedge Fund Managers Who ‘Have No Advantage’

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Chamath Palihapitiya told CNBC on Wednesday that the recent trading frenzy stemming from Reddit’s WallStreetBets demonstrates that retail investors can do the same quality of analysis as hedge fund managers who “have no advantage.”

The billionaire investor sees a “crackdown on the establishment” from retail investors, many of whom saw their parents lose money during the financial crisis while major Wall Street institutions were bailed out.

Palihapitiya said WallStreetBets’ 2.7 million users are as important to the market as any hedge fund. And, some Redditors do “incredible fundamental diligence” even better than professional hedge fund analysts.

He also lamented the lack of transparency within hedge funds that maximize earnings by using blue chip brokers, and called “Idea Dinners” in the Hamptons where a number of managers meet behind closed doors and present investment ideas.

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Investors on WallStreetBets are more courageous than managers, Palihapitiya said, because they discuss their ideas in public and aren’t afraid to admit losses.

“It takes a lot of trust in the system to be so transparent, to talk about things and then for each individual to make up their minds and do things, whether to buy or sell. And I think that is proof of this phenomenon. retail is here to stay, ”he added.

He predicted that in the long run the sophistication of retail would catch up with institutional sophistication, but first, hedge funds should be forced to disclose the details of their transactions like investors do on WallStreetBets.

“My take in all of this, if you want to make the system better and healthier, force more transparency from the institutional side,” Palihapitiya said.

“Why is it allowed for a person who runs a hedge fund to basically pretend that they are market neutral but have leverage? They take a $ 10 billion fund and their major brokers have them. manage a hundred billion dollar notional exposure – who thinks that’s right? ” said the investor.

“It’s not fair to the retail investor because when it explodes and a hundred billion dollar hole exists in a fund, which by the way is exactly what happened. passed in 2008, the government bailed them out – and who is the government? from us, ”he added.