Not that common–more likely to be found at a foreign place of business operating in Japan.
What does “outside money” mean exactly and why don’t the hedge funds that beat the market accept it?
Outside money is new investors. They can’t accept it because when they buy up an asset, the price of that asset increases. If they throw too much money at something it makes it too expensive to turn a profit on.
Money from people who don’t work there. Trading strategies that actually work have maximum bet sizes and at a certain point you wouldn’t want to share that with anyone.
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Isn’t the play to just do “Fund #2” where you invest in other stuff then in “Fund #1” and charge commission? Turning outside money down never seems to be the correct move when you earn money on commission?
The Fund 1 / Fund 2 stuff doesn’t play well in marketing, the whole “mystique” around hedge funds depends on the illusion that only Very Special Investors can get access to the Very Special Strategies that are employed by the Brilliant Hedge Fund Manager. Once that mystique starts to crumble they are lost.
I think you’re probably right that they could make more money by acting more like boring mutual fund companies with several classes of funds, but you’re talking about something that shatters their whole illusion that they are these brilliant minds that can beat markets with their strategies. Well, not the last several market cycles where they badly underperformed net of fees, but that was just bad luck then can assure you. Going forward things are looking up and they expect to outperform the benchmark by at least 200 bps using JARGON JARGON JARGON SMART BETA JARGON JARGON JARGON ABSOLUTE RETURNS JARGON JARGON JARGON.
If you have enough money to make all the investments you expect to be winners, there’s no reason to give away 80% of the upside on any of those bets. You could have a sideline where you run a fund that makes bad bets with other people’s money, but why would you want to torch your reputation and invite lawsuits and SEC investigations when you can just be stupendously rich without any headaches?
There is a case in real estate where you need (a lot) of money to do deals. But hedge fund strategies are no better when bigger, if fact the opposite is true, there is just no case for investing in them.
But it seems like you just need to beat the index funds to justify your existence. Basically, just having been able to predict that covid would crash the stock market or that there was a housing bubble (even if timing was wrong) would have been enough to crush SP500 in the last 15 years.
I think I’ll start up the Melkerson hedge fund. Strategy: Invest 99% in VTI and 1% in GOOG.
I should beat most other hedge funds and I think I’m a favorite to beat the market.
10 million minimum. PM if interested.
Even if you predicted COVID you would have had to know when to buy back in, and if you blinked you missed your chance.
There’s a reason none of these guys can actually beat the market. It’s nearly impossible.
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But what does it even make sense to have conviction about in the current economy? A B&M video game store not being a good buy when the vast majority of video game sales are digital downloads? A car company not being a good buy after it just had to recall half its fleet and doesn’t sell nearly the volume of its competitors?
Nothing makes sense. At least if I put my money into index funds, I can pretend that Der Markt in aggregate makes sense, even though it doesn’t.
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And even if you could make these calls, you have to find someone to take the other side of the bet. In practice, what really happens when you buy something on the public markets is that you’re buying from Citadel or Renaissance or some other hedge fund that actually makes consistent returns. The key to their whole business model is not ending up taking the opposite side of a big bet against someone who’s well informed. For a small amount of money it’s not a concern because they don’t care, but it’s a huge issue for big positions. Remember, on average the actively traded funds get the same returns as the index funds, so any outperformance in the active sector has to come at the expense of someone else in the active sector. And there are a bunch of quants with supercomputer clusters and armies of esoteric math PhDs that are pulling a lot of alpha out of the active sector. If you wander in there looking to bet on broad fundamental themes, you’re going to get your face ripped off. Or perhaps you’ll do well investing your first few million, then you’ll bring in some rich folks and pension funds to your first fund and then you’ll get their faces ripped off.
Were the expectations that they would have to recall all of their cars?
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Efficient markets. Efficient. Markets.
No bubble. Youre the bubble!
1 million cases - great news for STONKS. Especially travel STONKS.
I think America has just decided we’re done even pretending to care about COVID. We’re in the “its just a cold” phase, absolutely nobody outside like 10 cities is willing to be inconvenienced anymore. Obviously great for STONKS
I mean it’s never going to end. That much has been clear for months. Also speaking as a triple vaxxed person who just had it it very much is just a cold as long as you’re vaccinated and not immunocompromised.
That it would always be this way was so obvious that Don’t Look Up was written before COVID.
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