Why do the ultra rich stick money in hedge funds.

[noob_trad3r]

If they underperform the SPY ETF and the SPY etf has a cost of 0.10%

VS 2% and then 10-20% on any profits.

And to top it off you get lock out periods where you cannot touch your investment.

 

[SREC]

If you were ultra-rich, what would you do? Please note that most ultra rich do not care to sit in front of the screen monitoring their own investments, they have their own enterprises to run or are busy traveling and spending their wealth.

 

[alphav6O3q]

http://www.hedgeindex.com/hedgeindex/en/default.aspx?cy=USD

The hedge fund index(sort of an average of all hedge funds) does outperform SPY

 

[noob_trad3r]

Quote from SREC:

If you were ultra-rich, what would you do? Please note that most ultra rich do not care to sit in front of the screen monitoring their own investments, they have their own enterprises to run or are busy traveling and spending their wealth.

Just buy SPY and be done with it. That does not require sitting in front of a screen all day.

and brokers offer free automatic DRIP.

 

[alphav6O3q]

I believe this happens mainly because hedge funds have much more flexibility to use various instruments and strategies. Unlike the mutual funds which as a group always lag the SPY, and have to be always invested in the market.

 

[noob_trad3r]

Quote from alphav6O3q:

http://www.hedgeindex.com/hedgeindex/en/default.aspx?cy=USD

The hedge fund index(sort of an average of all hedge funds) does outperform SPY

nope.

https://www.hedgefundresearch.com/hfrx_reg/index.php?fuse=login_bd

http://money.cnn.com/2011/12/05/markets/hedge_funds_pensions/index.htm

Global hedge fund index. -9.13% YTD

worse than SPY ETF.

And MUCH MUCH worse than the SPY Putwrite

 

[SREC]

Quote from noob_trad3r:

Just buy SPY and be done with it. That does not require sitting in front of a screen all day.

That's idiotic. The ultra rich want premium returns. They don't just invest in random hedge funds, they do try to pick and choose. Often they are pushed toward bad investments (ala Madoff).

Regardless, you picked out some index that ignores the smaller niche hedge funds. The larger hedge funds aim for institutional funds, not the HNWs.

 

[noob_trad3r]

Quote from SREC:

That's idiotic. The ultra rich want premium returns. They don't just invest in random hedge funds, they do try to pick and choose. Often they are pushed toward bad investments (ala Madoff).

Regardless, you picked out some index that ignores the smaller niche hedge funds. The larger hedge funds aim for institutional funds, not the HNWs.

So the Ultra rich have to go through all these different prospectus packages and hope to score the rare diamond in the rough that always outperforms the SPY?

Look at the Paulson advantage funds, that is down over 30%.

do you have an example of a hedge fund that outperforms the SPY net expenses/fees over the last 20 years?

 

[SREC]

Quote from noob_trad3r:

So the Ultra rich have to go through all these different prospectus packages and hope to score the rare diamond in the rough that always outperforms the SPY?

Look at the Paulson advantage funds, that is down over 30%.

do you have an example of a hedge fund that outperforms the SPY net expenses/fees over the last 20 years?

SAC, Renaissance, Millenium, PTJ's fund.

Just like with everything else, it's done via word of mouth & recommendations from peers before these hedge funds hit mainstream. No need to go through prospectuses unless it tickles your fancy.

 

[DT-waw]

Still, huge majority of HNWI don't realize, that most hedge funds are designed to make the most income to HF owners and *less* income for investors, at their risk. this is done of course using mark ups, rebates fees and too high turnover.

Few million dollars enables superb diversification possibilites.
With properly constructed strategies, HNWIs could make 35% returns with maximum 5% (yes!) risk.
But they simply do not know that.