Did you read my earlier post? Is it ok to ask why do you still have him/her as your financial advisor (if s/he is still you financial advisor) ? It seems to me that s/he needs to be advised rather than advise others.
You are right! An analogy would be this: people generally trust a bank because the building where the bank is located looks solid. Anything that can make people feel good goes. Trust is the name of the game in attracting and keeping money (even if one loses it at the end. Then they say it is risk that did it).
I see your point and I agree with you. There are areas where I think one would use them/need them , but not really for the advice. Their value to me would for instance be in knowing updates in laws, accounting, but most importantly because they know other clients and financial advisors. Therefore if I were to manage money, I woud make sure to have a financial advisor who will see what I am doing with my money, and will never ask him for money to manage. If I am successful in managing my money, my financial advisor has eyes and would likely ask the question him/herself. Repeat the same with a lawyer and an accountant, possibly the banker as well. Numbers do not lie, and if they see success they recognize it, that is for sure. There is value, but not for the typical advice than one would expect from the title of the person. That is one of the reasons I was asking our above friend as I felt that there was value in other areas, but s/he did not reply so far.
Alot of funds are single strategy like long/short, relative value, but alot of hedge fund managers employ multiple strategies - i.e., multi-strat funds. The distressed funds are the most complex of the single strategies, IMO. Not in their algorithms or programs or anthing like that - these managers must be well versed in bankruptcy law and corporate structuring, as well as be able to deal with market risk. Mike Roth with a hedge fund called Stark Investments comes to mind as a very complex hedge fund with a massive edge in their human capital.
the reason I have a financial manager is because I have a nice sum of money that I personally am not comfortable managing myself as of the moment. I run a portion of the money but I keep the rest in a ubs account which is basically all bond funds and some mutual funds exposure but its pretty safe. I'm relatively new to the financial world so my confidence isn't there yet. its basically a little better than a bank account. I also learn a lot about things that the big brokerages have access to that I don't and how they work just by calling him up and asking questions. Sure he's just a salesman/broker but he also provides some insight that i would have never gotten. It doesn't surprise me that he doesn't completely understand hedge fund operations because I know his limitations and biases but he is still a good source for a non-pro like myself for things like understanding the real life details of things like a bond auction or purchasing a cdo. Sometimes i just ask him things to get a better understand what the big guys do or it could be simply to understand how they go about placing an order for something. I probably will always keep the account when I think about it....
I have started developing trading systems in 1992. I have tried about everything that one could possibly think of. My conclusion: Only very simple, robust, non-complicated systems with minimum arbitrary parameters work best! We are running our fund using 5 - 6 very simple, down to earth strategies. Of course, they are simple if you discover them and understand them well. And that, of course, is the main challenge!
A hedge is going to give you protection against having a position which is totally wrong. Perhaps as simple as buying a stock/index and then a buying a put option on the same. Strategies can be much more complex and change the "amount of risk", but the principle is the same.
I understand that is a true hedge but how many hedge funds focus directly on hedging? That's kind of what he felt what hedge funds do. He seemed to thing hedge fund strategies were complex hedge strategies...