I'm surprised there aren't any tales of collusion. Ya know, a few of these whales get together in McDonald's for lunch and decide which low float to ramp and then when to buy puts to unload the shares. Anyone remember the mutual funds loading up on the net stocks in '97 and '98 and walking the prices up? Such a dirty game. To think the mob still does petty stuff like go after store owners.
################################################################################### Same patterns, but some of the characters changed -bankers dont like risk; and green tea this mourning.
Last page (5), Quote: "With money pouring in, though, the manager with good results may have the upper hand. âWe have a manager that is no longer willing to wear shoes at investor meetings,â says Robert Schulman, CEO of Tremont Capital, which invests in hedge funds. " Is Victor Niederhoffer back?
No way but I certainly would not mind collecting some of those fees The article makes it sounds like that every "hot shot" that starts a hedge fund gets rich quick. For some reason it reminds me of the tech funds that had 200-300% returns 1998-2000 and were out of existence in 2002.
I wonder how investors make money in hedge funds: Short term profits take away 30%, management fees inlcuding incentive is 22%. Thus if the fund returned 20% then you give away 5% to management then another 4.5% to Uncle Sam netting 10%. Is it worth the risk?
Most are about controling risk and are not anything like what the media reports them as being. Brandon
Also, not all trade short term. I have a friend at a $500MM+ fund and their average holding period per position is over a year.
Keep in mind, a reported 20% return by a fund is AFTER all fees, the only thing remaining is your tax liability, which is true of any investment vehicle. I don't see all the fuss about what the manager makes, provided the returns are substantially above market - and positive annually regardless of the market. Is it worth it? That is the real question here. As long as institutions and individuals are of the belief that it is worth it, HFs will continue to attract money. You have large institutions like CALPERS and others who are under pressure to beat the market by a few points. They see flat returns in index products and want to roll the dice with a percentage of the account. These guys have figured that they cannot beat the market themselves so they are hiring someone to do it for them. They have gone from evaluating stocks to evaluating managers.