4 ms·
Hedge funds have customers because the majority of them don't beat the market in the long run. If a hedge fund is consistently highly profitable, they stop tak
by reverend_gonzo 10y ago
Hedge funds have customers because the majority of them don't beat the market in the long run.
If a hedge fund is consistently highly profitable, they stop taking customers. For example, see RenTec's Medallion Fund, which is only open to its own employees.
- scottlocklin 10y agoDepends on their Sharpe and capacity. Really, only prop shops have no customers, and even those were often backed by someone in the early days. RenTech's Medallion fund doesn't have customers, but it did for much of its history, and they have lower Sharpe programs with more market depth (and many customers). That said, the track record for Bay Area hedge funds trying to do things "the Silicon Valley way" without experienced founders (experienced in trading) is pretty grim. The ones who succeeded had a track record of doing it before.
- bogomipz 10y ago>"Hedge funds have customers because the majority of them don't beat the market in the long run" Interesting do you have any data to look at regarding that? How do they justify their 2 and 20 then?
- cortesoft 10y agoWell, originally the purpose was to 'hedge' your other investments. Typically, hedge funds invested in ways that would do well when the rest of the market struggled. Even if they don't best the market over the long run, they could be worthwhile investments to protect your wealth during ,Arlen downturns.
- bogomipz 10y agoRight, they don't hedge at all now do they? Its mostly just high speed trading?
- physguy1123 10y agoIn short, having someone do HFT with your money can be a hedge because HFT strategies often do better when markets are volatile and other funds lose money.
- deleted 10y ago[deleted]
- segmondy 10y agoExactly, if they can't extract their wealth from the market, they extract it from their customers.