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> It was started in 1949 by a middle-aged journalist with a masters in sociology and little-to-no investing experience. Cue eyeroll. This triggered a rant in m

by mjfl 2y ago

> It was started in 1949 by a middle-aged journalist with a masters in sociology and little-to-no investing experience. Cue eyeroll. This triggered a rant in me. We really shouldn't be giving so much money to these people. But the problem is that we individually don't have much control over the matter because the majority of their clients are large pension funds, endowments, sovreign wealth funds, and government managers of social security, which themselves are managed by... managers who have an incentive to hand off the risk of being fired for poor performance to someone else. Very few clients are actually high net worth individuals who trust the skill of the hedge fund manager. And indeed, most of them have no skill whatsoever. Hedge funds are, for a large part, part of a parasite economy, where large sums of money are diverted from astronomical sums of money without many people noticing.

chollida1 2y ago
> . Very few clients are actually high net worth individuals who trust the skill of the hedge fund manager. I'd check your assumptions. The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. You might be right about the skill assertion but no one is being taken advantage of. Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions. Even pensions that do allocate to hedge funds are such a small portion of the pension holdings. PE is probably a larger portion than hedge funds. Think about it for a second. There are a very few finite number of pension funds and a relatively huge number of high networth clients. I don't know which fund you work for to get your insight but you are incorrect in yoru assumptions:)
- mjfl 2y ago
  > Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions This is just blatantly false. The majority of clients are large institutions. FYI I used to work for one.
  - chollida1 2y ago
    > The majority of clients are large institutions. Well atleast we got you to move the goal posts from pension funds to large institutions but again think about the average hedge fund. The average hedge fund is 3 people and about $25M in money. What kind of institutional money do you think they'll raise? That's right, about zero and their capital will be their own and friends/ family and one or two anchor clients. Again with thousands of hedge funds and very few pension funds how could the majority of clients be pensions? Your assertion doesn't seem to pass a quick sanity test:)
    - throwup238 2y ago
      They didn't move the goalposts. They said (originally): > the majority of their clients are large pension funds, endowments, sovreign wealth funds, and government managers You said: > The vast majority of hedge fund clients are high net worth individuals "large pension funds, endowments, sovreign wealth funds, and government managers" are not high net worth individuals, by definition. You're just talking past each other (or you stopped reading after the first item of the list).
    - tingletech 2y ago
      I’m pretty sure my pension has holdings in around 100 hedge funds — but it has more allocated to private equity and real estate. The endowment has more in hedge funds than the pension iiuc, but in basically the same funds. The investment office also announced last year that it is going to divest from hedge funds and re-allocate that to private credit. The chief investment officer said the hedge funds didn’t proved any hedge in 2000, 2008, or 2020.
    - em500 2y ago
      > Again with thousands of hedge funds and very few pension funds how could the majority of clients be pensions? The US alone already has around 5000 defined benefits pension funds. (The smaller ones probably invest via fund-of-funds, rather than directly as a LP.)
- smabie 2y ago
  this isn't even remotely true
- Terr_ 2y ago
  > I'd check your assumptions. The vast majority of hedge fund clients are high net worth individuals [Citation Needed], especially if we're already at the point where people are being told to check their assumptions. One possible charitable explanation is that OP is talking about majority by assets, whereas you're talking about majority by identity.
- seanhunter 2y ago
  > The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. This is definitely not the case if you are talking in terms of the % of AUM. For all the hedge funds that I know about the vast majority of their AUM comes from institutional clients like pension funds. For big hedge funds even by number of investors the majority is probably institutions because they don't encourage individual clients and instead target their marketing at institutions so they can raise more AUM. Source: worked in the securities division of a major wall st firm for 8 years and had a lot of hedge fund clients, then worked for a hedge fund startup. Have close friends who have launched 2 hedge funds and have seen the whole process for them including cap intro etc. Worked at a software company where one of my clients was one of the largest hedge funds in the world so spent a bunch of time embedded onsite at that fund.
- Galanwe 2y ago
  > The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. That is very, very wrong. HNW have to small tickets to be interesting for most hedge funds, where the minimum ticket size is around $10M. The KYC is also much more complicated for invividuals, risk profiles are generally not aligned, and overall most individuals are not sophisticated enough to be a good fit as client. I say that after close to 20 years in the HF industry, and 2 partners positions... I would estimate the ratio to be 95/5 for institutional/individual. > Think about it for a second. There are a very few finite number of pension funds and a relatively huge number of high networth clients. There is actually a a really large pool of pension funds, funds of funds, and overall institutional investors out there. Basically most schools have endowments funds, every groupment of companies will have a fund for their employees, there's all the insurance companies, the state / countries pension funds, all the various banks and wealth managers, etc. > Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions Definitely not. Most HF have specific risk profiles and/or characteristics, that are not suited for individuals. Most HNW go to CTAs instead which are much easier to understand and advertise.
SilverBirch 2y ago
I'd like to know what you're proposing as an alternative. There are savings, we want to take those savings and give them to businesses to invest and grow and then share in the profits. This is good for the investor and for the business and as a result for the economy in general. It's literally a positive sum game - there may be inequality in society, but in general everyone is getting richer over time. Someone has to figure out the mechanics of taking that money and investing it. Who would you propose does that? And what do you think is a fair share for that job? If you think the Hedge funds fees are too high? Fine, take your money out of whatever hedge fund and stick it in SPY or pick stocks yourself, but there's good reasons you wouldn't want to do that.
- mjfl 2y ago
  I think the average person should, in fact, do what my former manager at the hedge fund advised me to do with my own money, just put it in a low cost index fund that tracks the S&P.

by mjfl 2y ago

chollida1 2y ago

> . Very few clients are actually high net worth individuals who trust the skill of the hedge fund manager. I'd check your assumptions. The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. You might be right about the skill assertion but no one is being taken advantage of. Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions. Even pensions that do allocate to hedge funds are such a small portion of the pension holdings. PE is probably a larger portion than hedge funds. Think about it for a second. There are a very few finite number of pension funds and a relatively huge number of high networth clients. I don't know which fund you work for to get your insight but you are incorrect in yoru assumptions:)

mjfl 2y ago
> Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions This is just blatantly false. The majority of clients are large institutions. FYI I used to work for one.
- chollida1 2y ago
  > The majority of clients are large institutions. Well atleast we got you to move the goal posts from pension funds to large institutions but again think about the average hedge fund. The average hedge fund is 3 people and about $25M in money. What kind of institutional money do you think they'll raise? That's right, about zero and their capital will be their own and friends/ family and one or two anchor clients. Again with thousands of hedge funds and very few pension funds how could the majority of clients be pensions? Your assertion doesn't seem to pass a quick sanity test:)
  - throwup238 2y ago
    They didn't move the goalposts. They said (originally): > the majority of their clients are large pension funds, endowments, sovreign wealth funds, and government managers You said: > The vast majority of hedge fund clients are high net worth individuals "large pension funds, endowments, sovreign wealth funds, and government managers" are not high net worth individuals, by definition. You're just talking past each other (or you stopped reading after the first item of the list).
  - tingletech 2y ago
    I’m pretty sure my pension has holdings in around 100 hedge funds — but it has more allocated to private equity and real estate. The endowment has more in hedge funds than the pension iiuc, but in basically the same funds. The investment office also announced last year that it is going to divest from hedge funds and re-allocate that to private credit. The chief investment officer said the hedge funds didn’t proved any hedge in 2000, 2008, or 2020.
  - em500 2y ago
    > Again with thousands of hedge funds and very few pension funds how could the majority of clients be pensions? The US alone already has around 5000 defined benefits pension funds. (The smaller ones probably invest via fund-of-funds, rather than directly as a LP.)
smabie 2y ago
this isn't even remotely true
Terr_ 2y ago
> I'd check your assumptions. The vast majority of hedge fund clients are high net worth individuals [Citation Needed], especially if we're already at the point where people are being told to check their assumptions. One possible charitable explanation is that OP is talking about majority by assets, whereas you're talking about majority by identity.
seanhunter 2y ago
> The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. This is definitely not the case if you are talking in terms of the % of AUM. For all the hedge funds that I know about the vast majority of their AUM comes from institutional clients like pension funds. For big hedge funds even by number of investors the majority is probably institutions because they don't encourage individual clients and instead target their marketing at institutions so they can raise more AUM. Source: worked in the securities division of a major wall st firm for 8 years and had a lot of hedge fund clients, then worked for a hedge fund startup. Have close friends who have launched 2 hedge funds and have seen the whole process for them including cap intro etc. Worked at a software company where one of my clients was one of the largest hedge funds in the world so spent a bunch of time embedded onsite at that fund.
Galanwe 2y ago
> The vast majority of hedge fund clients are high net worth individuals, with very few pension clients for the typical hedge fund. That is very, very wrong. HNW have to small tickets to be interesting for most hedge funds, where the minimum ticket size is around $10M. The KYC is also much more complicated for invividuals, risk profiles are generally not aligned, and overall most individuals are not sophisticated enough to be a good fit as client. I say that after close to 20 years in the HF industry, and 2 partners positions... I would estimate the ratio to be 95/5 for institutional/individual. > Think about it for a second. There are a very few finite number of pension funds and a relatively huge number of high networth clients. There is actually a a really large pool of pension funds, funds of funds, and overall institutional investors out there. Basically most schools have endowments funds, every groupment of companies will have a fund for their employees, there's all the insurance companies, the state / countries pension funds, all the various banks and wealth managers, etc. > Hege fund clients are almost all high net worth individuals who are very capable of making their own financial decisions Definitely not. Most HF have specific risk profiles and/or characteristics, that are not suited for individuals. Most HNW go to CTAs instead which are much easier to understand and advertise.

SilverBirch 2y ago

I'd like to know what you're proposing as an alternative. There are savings, we want to take those savings and give them to businesses to invest and grow and then share in the profits. This is good for the investor and for the business and as a result for the economy in general. It's literally a positive sum game - there may be inequality in society, but in general everyone is getting richer over time. Someone has to figure out the mechanics of taking that money and investing it. Who would you propose does that? And what do you think is a fair share for that job? If you think the Hedge funds fees are too high? Fine, take your money out of whatever hedge fund and stick it in SPY or pick stocks yourself, but there's good reasons you wouldn't want to do that.

mjfl 2y ago
I think the average person should, in fact, do what my former manager at the hedge fund advised me to do with my own money, just put it in a low cost index fund that tracks the S&P.