that is the way they are wired. the difference between prostitution and marriage is a piece of paper. http://online.wsj.com/article/SB121617220846656637.html?mod=todays_us_nonsub_page_onen the weeks before his death, Mr. Coles was beset by personal and professional difficulties. His second wife, 26-year-old Ashley Coles, had just left him for a 48-hour trial separation, according to the police report on his death he was 48 years.
The fundamental flaw has been evident all along, only it is now evident to the dumbasses who missed it when was costing them money. Paying 20 to 40 of your profits to someone randomly selected by strings of wins is no different than taking from your savings that same amount of cash and piling it in your patio grill and setting it afire. The randomness that produced the misconception of skill and confidence in it guarantees that the string will end and reverse. Foolish not to have understood that in the first place. Stated differently, the fees structure is profit that would and should cushion losses today, but since those profits never materialized, and instead were a fools' tax, the fools are losing more today than they should be losing. The fools would have been better off dart throwing long equity positions all along and continuing that practice today. Net they'd be richer.
Think what happens when people try and get their money out of a ponzi scheme or out of a bank in a fractional reserve banking system. My guess is that if everyone tries to get the money they think they made in a hedge fund investment they will find they didn't make it after all. My suspicion is that results were smoothed with mark to make believe stuff such as unlisted company investments etc.
Some of the nitwits in this thread are acting like EVERY hedge fund is run by a moron who can only buy the market and can't possibly prepare himself for a down market. The truth is, there is a wide variance in managers. I am involved in a fund of funds, with some great portfolio managers. Worst monthly drawdown is about 3% in the last 18 months. There ARE good managers out there.
O.K. I'll have a go: Its something that invests in manager compensation structures masquerading as an asset class.
I don't believe the level of discernment and acuity you apparently possess is representative of all buyers of hedge and fof products. I base that on my own experience of being pitched some of those products. The content of the pitches did not imply as much sophistication as you apparently possess. Maybe it's just me: the pitching reps must have assumed I was rube. By the way, given your ability to discern the outstanding fof and separate it from the poor ones, why not transfer that ability to trading and save yourself the fees? That ability is fungible, or didn't you know?