hey, its good to talk to old ET folks! i agree that generalizations are in *ghm* general, a bit off the real state of affairs. i'd like to meet with rational, sane, both courageous and conservative (at the same time) investors, but.... these are rare and between. think about it: if big money would allocate money (and more money) to successful AND risk-averse managers - who will lose? i'm not saying that rational HF clients do not exist. they do, but in order to knock at their doors first you have to spend your precious time talking to a bunch of totally delusional investors. there is a reason why Winton, Altis and QIM accept minimum $20M. Don't want to waste time with little fish.
I agree. Think of the cocktail circuit in Greenwich. It is not a fund manager type hang out where anyone talks about how it works. All that is talked about it how I got screwed by whom.
OK. Yes. My oh my. Cut the bullshit. No conjoined minds. Email me at pierremfjanet@gmail.com No conconspiritors. Just you. No posturing. If you won't, ask Liz to, haha. It's not like I haven't discoursed with her before!
But again, that's too big a generalization. You're talking about a segmented psychological profile of high net worth investor who views hedge funds a certain way. Not to mention that the volatility profiles and typical risk levels of funds range across a huge spectrum. If high net worth investors only saw hedge funds as gambling vehicles, you wouldn't see funds with long-term CAGRs in the low teens and single-digit drawdown profiles that yet run billions to tens of billions. Then too there is a whole range of what counts as an accredited investor... from the guy with $2 or $3 million from the business he just sold to the guy with nine figures... it just seems clear to me, from my own experience, that while the segment you speak of certainly exists, it is indeed a segment and not a useful generalization.
And do you frequent the cocktail circuit in Greenwich? I don't, but I have colleagues who do (by virtue of living there). There are many top notch managers who have very happy clients who have been with them for years, even decades - and not only that, these managers tend to be closed to new money, with the ability to raise more capital in a heartbeat (though without desire to). As with any white collar profession, some hedge fund managers are untrustworthy, mediocre, questionable, even terrible, etc., and some are genuinely good at what they do, even great at what they do. There is a spectrum. This seems so obvious, and is such a matter of public record (in terms of knowing who the standouts are), I can't believe I have to say it out loud. What is the point of these dumb generalizations? It's like saying all doctors are quacks or all lawyers are scumbags. The jokes can be funny, but to actually believe it is obtuse.
Cheers! A toast to the old schoolies. Yes, absolutely and without question. But "rare and in between" is not the same as nonexistent. They can be found! Well, this is exactly what happens when the process works as it should. A great manager does very well by his investors, and everyone is happy. Take Klarman at Baupost or Dalio at Bridgewater for example. Risk averse success is what they do. And just as there are high profile superstar managers who deliver on the promise of what hedge funds are actually supposed to do, there are smaller, more obscure managers who do this as well, with investors who are just as happy. You just don't hear about them because they aren't widely publicized (if publicized at all). On the bright side, it is much, much easier to deliver superior risk-adjusted returns with a smaller asset base (i.e. less than $100MM) than it is with billions, though it is still by no means a cakewalk. The process works, there is just a lot of crap out there. It's like with books and music and movies -- 90% of what gets put out there is crap (if not more), but the 10% makes it worthwhile. There is a fundamental difference between "most music / movies are terrible" and "all music / movies are terrible" etcetera. It is possible to find smart, savvy, good to hang out with type folks at the small investor level too. Again, I'm not saying it's easy or that one can find them on street corners. But there are worthwhile investors out there who understand the concept of sober calculated risk -- often via building wealth in their own business, making calculated risk trade-offs themselves over a long career -- and who appreciate the value of logical, dependable risk-adjusted returns. I mean think about the general population. Net worth aside, how many adults on average are educated, interesting, personable, and all around enjoyable to interact and have conversation with? Maybe 10 or 15% tops? One could expect a similar dynamic with potential accredited investors... some are wonderful to have in your corner. Others aren't worth touching with a ten foot pole.
In my opinion, and that's all it is, the CAGR long term hedge funds are invested in by institutions, pension plans and other "controlled" money sources--- not the UHNW hedge fund investor--- in general, of course-- there are exceptions. Sure , lots of dentist types with 5 million who want to invest--- but I'm talking about professional hedge fund investors not accredited investors. One guy I know is invested across 100 different hedge funds, if you want his money, he doesn't permit lock ups and doesn't pay management fees-- performance only-- every quarter he cuts the bottom 10% of performers and replaces them with 10 new ideas. He trades hedge funds like we trade stocks--- before I got into this business I had no clue people of this vast wealth even existed. It still amazes me at times.
as proffered, there are the records of funds and those who become clients. I can imagine a guy who goes for the fund orientation. I can see him in his library or office making a list of the folks who garnered his interests. He has a need to replace 1 out of ten just once a year. There must be another half to the story. Making a list and crossing out 1 out of 10 seems so brief and unsuitable. The list is a ranking. colukd lines be drawn for deciles of market performance? I guess so. Now, I am standing in a lovely living room and I drop into conversation with a person. It's Greenwich and we both are gueasts of a champoion hustler host. We find the person's vocation is my avocation. So I do let my avocation become a little vocational. Portal to portal is 1962 and my take is 100 bucks an hour. I move to Switzerland. The person "tracks" me down.
Exactly, that's a great description. Getting funding from institutions is near impossible, but individual professional hedge fund investors are much lower hanging fruit since they seek out unique edges and strategies without the institutional BS.