If they actually did bet against the herd. "Hedge fund" used to mean a fund that actually hedged their bets, but there's no law that says they have to, and a number of them just bet.
What seems to happen is that during boom times, a lot of unskilled and unaware of it money managers get into the market, and they tend to bet with the crowd. We get a big bubble as a result, the bubble pops, and all the shitty fund managers get flushed out of the market. Then we get several years of stability as the prudent money managers who thought for themselves rule the show, until their performance attracts new entrants who don't know what they're doing, and the cycle repeats.
I actually think that we're in one of those prudent periods right now - most securities seem fairly valued, at least now that the unicorn bubble is deflating. But in 05-08? I worked in financial software then, and a number of my peers (straight out of college!) were hedge fund managers. There were some good ones, but many of them had no business being near anyone's retirement fund.
What seems to happen is that during boom times, a lot of unskilled and unaware of it money managers get into the market, and they tend to bet with the crowd. We get a big bubble as a result, the bubble pops, and all the shitty fund managers get flushed out of the market. Then we get several years of stability as the prudent money managers who thought for themselves rule the show, until their performance attracts new entrants who don't know what they're doing, and the cycle repeats.
I actually think that we're in one of those prudent periods right now - most securities seem fairly valued, at least now that the unicorn bubble is deflating. But in 05-08? I worked in financial software then, and a number of my peers (straight out of college!) were hedge fund managers. There were some good ones, but many of them had no business being near anyone's retirement fund.