3 ms·

My impression is a lot of LPs are asking “why am I paying 2/20 or 1.5/15 to get returns that are either 40% correlated to a passive fund, or don’t beat the mark

• whatok 8y ago
  Yes, agreed but am wary of comparing any proper hedge fund's returns over a short time frame vs the market. They are supposed to be absolute return vehicles. By nature of (supposed) uncorrelated returns, a lot of funds are not going to beat the market if it just goes up and to the right but definitely should be outperforming in other markets.
• MR4D 8y ago
  You can beat the market in two fundamental ways: 1 - Higher returns 2 - Lower volatility Effectively, everything else is a variation on those two (e.g. same returns with lower volatility; or really low volatility, but better than the AGG; or really high returns with really high volatility (highly leveraged funds) ). The reason this is important is because different investors want different things. If you can beat the AGG at the same or lower volatility after fees, then it doesn't matter how much you charge - people will beat a path to your door. One interesting example is Renaissance Technologies. Several months ago I was reading through their SEC filings, and if IRC, they charge 4 & 40 ! Yes, FOUR and FORTY - to their own employees! For the record, it's a monster fund, and you can't invest in it unless you work there. Yet people will do anything to get a job there and pay those fees because the fund is so good.