Posts filed under “Hedge Funds”

You Can Be a Hedge Fund Investor. But Why Would You?

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My Sunday Washington Post column is out. This morning, we look at why hedge fund investing is so very overrated.

The print version had the full headline then there were “You can be a hedge fund investor. But why would you?” (The online version is A hedge fund for you and me? The best move is to take a pass).

Here’s an excerpt from the column:

“Given these increased risks (and higher fees), how have hedge funds performed?

By most measures, not well. They have failed to keep up with major averages when markets were up — and they got mangled (like nearly everyone else) during the 2008-09 downturn. It turns out, most hedge funds are not very hedged.

The latest performance data (via the HFRX Global Hedge Fund Index) reveal that hedge funds haven’t fared well at all: They returned a mere 3.5% in 2012, while the S&P 500-stock index gained 16%. Over the past five years, and the hedge fund index lost 13.6%, while the indices added 8.6%. That’s as of the end of 2012; it has only gotten worse in 2013. Most hedge funds have fallen even further behind their benchmarks this year, gaining 5.4% vs. the market’s rally of 15.4%. As a source of comparison, the average mutual fund is up 14.8%.”

Some of the data on fees is pretty astonishing. According to former JPMorgan Chase hedge fund seed investor author of “The Hedge Fund Mirage,” Simon Lack, this fee arrangement is effectively a wealth transfer from investors to managers.

• From 1998 to 2010, hedge fund managers earned $379 billion in fees. Their fund investors reaped only $70 billion in gains.

• Managers kept 84% of investment profits, while investors netted only 16%.

• Fund of funds/ feeders tack on yet another layer of fees, bringing the industry fee total to $440 billion — ~98%

Astonishing. Full article at Washington Post.

 

Source:
You can be a hedge fund investor. But why would you?
Barry Ritholtz
Washington Post, May 26 2013
http://wapo.st/11fgyB2

Category: Apprenticed Investor, Hedge Funds

Romancing Alpha, Forsaking Beta

This is the presentation I gave at the IPI yesterday:

Category: Hedge Funds, Psychology

GMAMX: Goldman Sach’s Muppet Fund of Funds

In our day job, we have a Fiduciary relationship with our clients. A Fiduciary has a legal obligation where all actions are performed for the benefit of the client. It is a much higher duty of care than the typical “Suitability” standard, which essentially says you cannot sell Facebook IPO shares to Grandma. We sit on…Read More

Category: Hedge Funds, Investing, Really, really bad calls

Dilbert: The Best Way to Evaluate a Fund

Click to enlarge Source: Dilbert

Category: Hedge Funds, Humor, Weekend

Jim Rogers & Me at 4th Alternative Investment Strategies

Click for more information Source: FAMag   For more information, click here.

Category: Hedge Funds, Investing

Jim Rogers & Me at 4th Alternative Investment Strategies

Click for more information Source: FAMag   For more information, click here.

Category: Hedge Funds, Investing

10 Figure Hedge Fund Paydays

Click to enlarge Source: DealBook     7 Figures? Forget that low rent compensation! Today, We have a 8 figure (10 Millions) paydays, 9 figure (100 Millions) paydays, and now, we have 10 figure (1 Billion plus) paydays.

Category: Hedge Funds, Wages & Income

Chanos: Ackman, Einhorn Help Expose Fraud

Chanos:

“I think [hedge funds] play an important part, particularly from the short side. Short-sellers and hedge funds are actually real-time financial detectives in that they are incentivized through profit to ferret out fraud, and I think that’s a very important role that people forget about from time to time.”

 

Click for video

Source: Yahoo Finance

Category: Hedge Funds, Short Selling, Video

Marty Lipton on Activist Hedge Funds

Our quote of the day:   “The activist-hedge-fund attack on Apple — in which one of the most successful, long-term-visionary companies of all time is being told by a money manager that Apple is doing things all wrong and should focus on short-term return of cash — is a clarion call for effective action to…Read More

Category: Corporate Management, Hedge Funds, Really, really bad calls

Why Are Hedge Funds Underperforming?

What “Smart Money” Smackdowns Mean for the Individual Investor
click for video

Source: Yahoo

Category: Hedge Funds, Video