if i had to guess, id say 99% of hedge fund strategies are a complete sham, they simply have no edge. add to that the retarded fee's and they become an even bigger sham. they are basically gambling. yes, there are the 1%ers who have legit strategies (rentec, and others) but they are mostly closed to new money and the minimums are most likely obscene. anywho, hedge funds are simply a marketing ploy.
One of the nice things about mutual funds is transparency. Can anyone point to any info/performance about Waverly/Barber's fund? As far as I can tell they just run an advisory service.
everything moves together, up and down. If you want to beat it you need to buy into stocks that will move just a little more than the market. But that 4-10% price gain will be greatly reduced by diversification. So if you think you shouldn't 20 stock diversify then you will need to pick the right 10 or so stocks. But you'll probably end up picking 8/10 that are good and 2/10 that go no where, so really your 80% portfolio will probably not beat the 100% market so maybe you leverage up or hold short positions. Well if its a strong market then the short positions will likely fail so really you need leverage. Or you can just buy 3-5 stocks, I think thats better. Infact, if I ran a hedge fund I would just leverage up on 3-5 stocks and make sure their very large cap (20B+) to reduce risk of bad earnings sell off or overnight large % decline. Overall I think the last 3-4 years have been kind to mutual funds because in a strong bull buying and holding pays well. Hedge funds should perform better in a flat or declining market because stock picking and timing probably becomes more important and short positions pay off better. I also think hedge funds probably operate with shorter time frames so many are likely losing because their selling into what they feel are tops where as mutual funds will keep holding until the very end.
How are owners of such funds compensated? Article says it's not 2/20% fee like HF's, but should be some financial reason to run them for founders.
This thread reminds of when Icahn's fund leveraged up 5:1 on a merger and made 35% net of fees for the year but only made 7% actually on the stock.
I read about this guy hired to manage a mutual fund. In the first 6 weeks of the year he made 20% and got the bright idea to take the rest of the year off. He figured 20% was good enough. Ahhh..don't work that way. Mutual funds have to be fully invested all the time, recipe for disaster, get back to work, fella. Secondly, which pissed me off. My daughters plan at work, it was time to go to cash and preserve her gains. Guess what? No such thing as cash in a MF. You get cash equivalents, which at the time followed the market. There weren't any CD's or any such thing to hang onto the cash for cash sake. Which brings us to endowments etc that require a return of %5 or you have to dispurse some of the funds. These hogs were buying up mbs,cdo's etc as long as the seller claimed a greater than 5% return, well that didn't work out quite as well as planned as we all know. brka is a MF, but hey, who wants to buy 1 share and hold that forever when you can buy 156k shares of some dollar stock and impress your friends with size...... (smack forehead, i just had to say that)