The ultimate history of Refco has yet to be written, but Bloomberg Magazine is a good head start. (Thanks to Paul Kedrosky at Infectious Greed for the link.)

Mark Hulbert in the New York Times highlights some interesting research on mutual fund performance. Apparently funds that outperform their starting portfolio tend to outperform in the future. The “return gap” calculations are simple, given the data, and avoids the entire issue of benchmark selection.

Terence O’Hara in the Washington Post interviews Bruce Bond of ETF provider, Powershares Capital Management. Bond is not surprisingly positive on the future of exchange traded funds.

“I think today that ETFs don’t vie for the same retail investor dollars as mutual funds,” he said. “It’s really been a product up to now for the more sophisticated investors, like early adopters for consumer-technology products.

“But I believe we’re going to see that shift over the next year or two. In 2006, we’re going to see ETFs really compete directly with mutual funds dollar for dollar.”

John Spence at Marketwatch.com notes the launch of the Euro Currency Trust (FXE) which now allows investors to invest and trade the Euro using an ETF.

“This ETF allows you to not only get that currency exposure, but to get paid for it as well, essentially adding a fixed-income element and a portfolio hedge that is easily accessible to any investor,” added Jim Wiandt, editor of the Journal of Indexes and ETF expert.

John Wasik at Bloomberg.com notes one important benefit of portfolio diversification is:

Diversification can be liberating because it affords you the luxury of ignoring market forecasts. And not only will you be able to stop fretting about property values, you can be home free to invest for all of your financial goals.

Daniel Gross highlights a story that proclaims, “The hedge fund fad is fading fast.” We noted earlier that hedge fund supply and demand seems to be coming into balance.

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