These claims are unfounded. I have known several hedge fund investors who have made quite a lot of moneys. Of course, like in any endevours of life, not everyone can be a winner. Even at an elite academic institution, not everyone can get an A.
Acutally, this is true of EVERY company out to make a profit. The end user always gets jacked for the true value + whatever (labor, transporation, salaries, etc.).
Seeing how analysis is done for the wealthy, the answer is correlation. In the long run the funds on average outperform SPY and to reduce drawdowns they put the money into uncorrelated funds to reduce stress. You can buy ETFs nowadays too but active management is still considered valuable.
your all wrong........ they like to watch 'em blow up and get a tax write off for year end. http://www.youtube.com/watch?v=dsrOXJwGwtk&feature=related cheers, s
they were not fans of groucho marx who said I would not be a member of a club which would accept me as a member.
Enlighten us, please? In any case, what the hell is "5% risk" - is it 5% max drawdown? is it 5% P&L volatility? is it some other measure I am not aware of? As for "why HFs?" - mainly diversification and decorrelation of the income stream from the rest of their investments.
because they are "sold" the idea that they are better than the average joe and therefore deserve a "premium" vehicle that will outperform all others. Basically they just appeal to their ego. Just shows you that rich people are no smarter than the average.
yes, maxDD. not monthly, from daily peak to daily valley. simple technology: just mix 50 single intraday strategies with profit factor over 2 on at least 8 markets. i'm sure many HNWI will be very surprised if they'll find out that most HF managers are NOT interested in enhancing their trading arsenal, technology, etc. Exactly like their investors, HF managers or owners are busy spending the money already earned on fees, traveling searching for new clients, investing in non-financial businesses. Why hedge funds? Its potentially the best vehicle to invest. Gold, real estate won't make any decent returns in the years to come. Where else can you earn over 20% p.a.? Well, some places come to my mind: sillicon valley, start-ups, Hollywood?
Well, like anyone. Fleecing the client is not unique to finance, by no means. I had an electrician come by to change some wiring. He took apart one of the light switches and disappeared saying "I have to go buy some parts". Needless to say he was paid by the hour and appeared back in about two, rested and happy. Then he tried to charge me $150 for a $12.50 light switch he bought at the local hardware store, as evidenced by the shopping bag and the receipt in it. His response? He said "I have to make a profit, you assholes!"