HFs, as represented by the aggregate HF index, have done better then S&P (total return) over the recent past: years | HF AGG | SPTR 1 |-2.0% |7.8% 2 |4.3% |18.5% 3 |17.0% |48.6% 5 |10.1% |-0.9%
Yes, it might work but might not. I'd recon it would be pretty hard to find 50 decorrelated strategies that would not be subject to liquidity constrains. This said, I do know guys that are generating double digit returns on small capitals like 1-3 million. It's not something that's easy to replicate and is pretty much a full time job.
"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." DING DING DING .. We have the Winner!
your figures prove nothing of the sort. there is the remainder bias. hedge funds that are in heaven or purgatory are not included. it doesn't include fees and taxes. the argument that taxes are different for each participant is a cop-out. unless I am reading the #S wrong the sptr has outperformed the hf agg for the years 1,2,3.
The vast majority of money comes from investment managers of pension funds across the world.These funds stick money in them , because funds give kick backs (OFFICIAL AND UNOFFICIAL ) to the individual fund manager who is responsible for investing.The fund manager and hedge funds join forces to take investors to the cleaners.FULL STOP. http://www.reuters.com/article/2009/05/01/us-newyork-pension-idUSTRE53T8X120090501
Anyone who has had the chance to shake the hand and share a drink with the strikingly beautiful girl who hooks investors for John Paulson has the answer to the question at the beginning of this thread.
I think you'll find for obvious reasons that 'premium returns' is not what they're after at all. Instead think capital preservation + a few hundred basis points performance over general inflation.
Well, that is by no means different from S&P or any other index - companies that have been dropped from the index or defaulted would not contribute after that point. However, from the investor perspective, if you are investing into the broad index via a fund of funds or some other allocation service, the index is a good enough benchmark. To address the survivorship bias, you can look at any NAV index, e.g. Dow Jones Credit Suisse Hedge Fund Index which includes pretty much every 10m+ fund in the TASS database. Just to clarify, "years" column is years back (e.g. 2 means total return over the last 2 years): years HFNAV SPTR 1 0.5% 7.8% 2 9.3% 18.5% 3 28.5% 48.6% 4 4.5% -8.0% 5 19.2% -0.9% 6 35.5% 13.2% 7 45.7% 22.8% 8 60.4% 38.6% 9 83.5% 59.5% 10 89.3% 33.2% 11 100.5% 16.9% 12 122.3% 11.9% 13 160.5% 35.3% 14 160.0% 67.4% 15 218.2% 115.1% While there where numerious years where SPTR outperformed the HF index, the long-term returns are superior. They are even better if you look at them in some risk-adjusted mode. NAV calculation actually includes the AUM fees, but probably excludes the performance fee. Taxes are different for each participant and it's worth remembering that majority of HNWI do not live in the US. As well as that majority of hedge funds are not domiciled in the US either. So I don't think bringing taxes into the picture is right at all. In any case, I don't understand what the whole fuss is all about. Are there funds that produce better risk-adjusted returns then S&P 500? Certainly, plenty of them. Are there funds that produce returns that are decorrelated from the market? Yes, a fair number. Should someone with a few bucks to spare allocate some capital to these strategies? Probably. Should they put all of their capital there? Certainly not.