How to start a Hedge fund?

[prc117f]

What exactly makes it the best business in the world?

LOL Ask HF managers collecting all those fees from the sheep who get sheared and keep coming back for more.

 

[prc117f]

Or better yet become your own hedge fund - no cumbersome accounting to mess with or regulatory head aches. How to do it: live below your means saving 30-50% of your income - always pay yourself first, than the bills. Now trade up as you go. Before you know it you'll have more than enough to go at it alone.

Thats how I did it.

 

[Sig]

I always wonder why do people give these people money to gamble away?

That would be like you giving a stranger 50K to fly over to Vegas and spend a week there. They get all the fun and action, you just get the empty bank account. I cannot figure out why people hand HF managers so much money to underperform the index (At best) or lose it all.

Clearly underperforming isn't the "at best" scenario, many outperform and in any case most hedge funds aim for absolute vs relative returns. If you're an institution that is looking for uncorrelated strategies for your portfolio, even the absolute returns may not be as important as correlations given how modern portfolio theory works. So very different from Vegas and lots of reasons, they just may not apply to you.

 

[zdreg]

I always wonder why do people give these people money to gamble away?

That would be like you giving a stranger 50K to fly over to Vegas and spend a week there. They get all the fun and action, you just get the empty bank account. I cannot figure out why people hand HF managers so much money to underperform the index (At best) or lose it all.

the answer is bragging rights. it is to convince others that they are members of an exclusive club with highly successful people.. of course these people are unfamiliar with the famous saying by Grouch Marx, the famous comedian: I would not want to be a member of a club that would accept me as a member.

 

[zdreg]

Clearly underperforming isn't the "at best" scenario, many outperform and in any case most hedge funds aim for absolute vs relative returns. If you're an institution that is looking for uncorrelated strategies for your portfolio, even the absolute returns may not be as important as correlations given how modern portfolio theory works. So very different from Vegas and lots of reasons, they just may not apply to you.

correct. it applies to sophisticated institutions not to clueless people in this area but are wealthy individuals.

 

[prc117f]

Clearly underperforming isn't the "at best" scenario, many outperform and in any case most hedge funds aim for absolute vs relative returns. If you're an institution that is looking for uncorrelated strategies for your portfolio, even the absolute returns may not be as important as correlations given how modern portfolio theory works. So very different from Vegas and lots of reasons, they just may not apply to you.

Do you have an example of a well performing hedge fund over the last 15-20 years? Curious since you have your one hit wonders, people who then attract money like moths to a light and somehow they parlay that one time hit into milking people for years.

 

[Sig]

Do you have an example of a well performing hedge fund over the last 15-20 years? Curious since you have your one hit wonders, people who then attract money like moths to a light and somehow they parlay that one time hit into milking people for years.

Renaissance has a 35% annualized return over 20 years, for one. Again, however, you invest in hedge funds if you're putting together a portfolio where correlation matters per modern portfolio theory. That's why the majority of their LPs are institutional investors, for whom hedge funds make up a small percentage of their portfolio. If all you care about is 20 year returns, hedge funds probably aren't for you.

 

[sle]

LOL Ask HF managers collecting all those fees from the sheep who get sheared and keep coming back for more.

Pretty much every "real" hedge fund manager has at least 50% of his net worth invested in the fund. Otherwise, you can't get a a penny of institutional money - it's the first question they ask. So if you gonna lose money, a big part of it is gonna be your own.

Do you have an example of a well performing hedge fund over the last 15-20 years? Curious since you have your one hit wonders, people who then attract money like moths to a light and somehow they parlay that one time hit into milking people for years.

Plenty. Most of the names we hear are there because they lose money or have massive redemptions. I can think of many multi-yard names that have been brining home double digit returns for the last 15 year.

 

[Mtrader]

I cannot figure out why people hand HF managers so much money to underperform the index (At best) or lose it all.

Because they think that for them it is the best solution as they hope thet HF will lose their money more slowly then the other options that are available.

 

[Mtrader]

Renaissance has a 35% annualized return over 20 years, for one.

The problem is that for years already it is impossible to put your money in Renaissance. So what's the value for people who want these returns? Zero possibilities. So although you are right about the returns the example is useless, it is like hindsight trading.