Very funny. And how true.
Whoever doubted it?
I don't get it, if there goal is to get returns close to the market, why don't they, like, you know, buy into the index?
I'm really confused.
MattR
Their goal is not actually to return close to the market. Most HF investors ask for libor + 5% or about 10%. Hence iof the mkt goes up 15% and the HF only goes up 10%, most investors are pretty relaxed as they hope that if the mkt falls 15%, the HF will still be up 10%.
that's the idea, anyway,
You are right, it is a complete con.
One hedge fund goes short, one goes long. One of them is bound to have super returns, managers get their 2 plus 20. The other one, whoops, managers just get the 2.
I do tax returns for several hundred unit trusts, the rate of attrition is enormous, about a quarter get shut down every year, i.e. the ones that underperform badly, so if you start off with 100 funds, and follow this strategy for ten years, you end up with 5 or 6 funds which you can honestly say have outperformed the market for 6 or 7 of the last ten years.
Mark
And the really great trick is that in all the published HF Indices, those funds that fail are excluded, so you have a massive 'survivor bias'.
Pommy
Thanks mate. Yep you are right it's a con. Although I'd love to work as a hedge fund manager!
yeah me too!
But they are all gonna go in the shakeout though. lucky them they are all rich by now anyways.
If we're identifying the rich, the target is this sentence:
"HF managers...all drink at the same bars, attend the same parties, and are paying alimony to the same divorced wives."
And, yes, I have a former coworker who declared (during his third divorce before he was 40) that he would "have to work three more years" just from the Latest Mistake.
Years from now, DeLong, Levitt, and Hanford will do a cui bono paper proving that the wives got all the excess gain and that the poor HF managers were underappreciated.
quite some truth in here
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