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The advantages that mutual fund managers have are: experience running large assets, stock-picking ability, and access to initial public offerings from Wall Street relations; in addition, they are willing to cap assets realizing that larger unwieldy assets may impact performance.

While Vinik has done well, not all mutual fund managers have done so well or even stayed within the hedge fund community.

Some of the problems encountered by former mutual fund managers may be they have no shorting experience, aren't familiar with leverage, have no experience with derivatives, or don't do well when they lack the resources of a big firm. And finally, they often have a different mind-set—outperforming the S&P (mutual funds) versus absolute returns (hedge funds).

Over the years, proprietary traders at investment banking firms have been another large source for hedge fund managers. Goldman Sachs spin-offs include Robert Albertson, Cliff Asness, Andrew Boszhardt, Leon Cooperman, Roderick Jack, Marcel Jonsen, Kent McCarthy, Dan Och, Erinch Ozada, Anthony Scaramucci, and David Tepper. Morgan Stanley had been the starting point for Phillippe Burke, Richard Coons, and Peter Ogden. Salomon Brothers had been the starting point for John Meriwether of Long-Term Capital Management notoriety as well as Michael Balboa, Tim Irwin, Alistair Kerr, Praveen Mehrotra, Nicholas Stefanou, Peter Thomas, Alfredo Viegas, and Mustafa Zida. Tom O'Neill, chief investment officer at Fleet-Boston Financial Corporation is a recent example. He has decided to focus full-time on his $350 million Navigator hedge fund family. (See Table 3.2.)

The economists have also been represented. Henry Kaufman, who had been chief economist at Salomon Brothers, started a hedge fund in 1996 with Chuck Leiberman, who had been head economist at Chase Bank and previously at Chemical Bank. Strategic Investment Management eventually closed down in 1998.

Institutions are starting hedge funds in-house in an attempt to keep their best internal traders as well as to take advantage of downturns in the market and to offer a product to an audience that otherwise would not consider hedge funds. These include Alliance Capital, Bank of America, Bankers Trust, Citibank, State Street Global Advisors, Montgomery Asset Management, Sanford Bernstein, Wellington Capital Management, and most recently Driehaus Capital Management.