What are hedge funds, and what social functions do they serve?
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Re: What are hedge funds, and what social functions do they serve?
#2Notes and errata:
Simple answer to the question posed in paragraph two ("How did a few asset managers earn more money in a single year than Pierpont Morgan did in his whole life?"): inflation. ($1.5B in 1913 is about $36B today.)
Threshold for becoming an accredited investor is $200k annual income or $1M net worth.
Particularly interesting is the overlap between hedge funds and VC investors / angels, considering the similarities.
Re: What are hedge funds, and what social functions do they serve?
#3Thank you for changing the title -- the reasoning for such a title is spurious at best, which likely was this single notable line:
> They’re more secretive; they’re less constricted in the trades they’re allowed to make; and they say they hire the best people working with the best technology.
Which applies to pretty much every leading technology company just as well, or start-up flush with free money.
Re: What are hedge funds, and what social functions do they serve?
#4Fairy long article. Here's the summary:
Hedge funds are investment vehicles that have avoided being heavily-regulated because they only accept money from government-certified "accredited investors." Their investment strategies are secret and unconventional. Some of them deliver floods, while the average one doesn't do that well.
Hedge funds provide liquidity, which makes it easier to trade; and conduct arbitrage, so that prices are muscled into line before they get totally irrational. (The latter doesn't always work though.) Meanwhile, since they have fewer safety nets, hedge funds are more aggressive about monitoring their own risk. They're better than banks in that respect, which are much more heavily leveraged and which have a history of being supported by the government when they mess up. Hedge funds have never been bailed out by the government like banks have time and again.
Re: What are hedge funds, and what social functions do they serve?
#5Notes and errata: Simple answer to the question posed in paragraph two ("How did a few asset managers earn more money in a single year than Pierpont Morgan did in his whole life?"): inflation. ($1.5B in 1913 is about $36B today.) Threshold for becoming an accredited investor is $200k annual income or $1M net worth. Particularly interesting is the overlap between hedge funds and VC investors / angels, considering the…
First sentence: "a fortune of about $1.5 billion in today’s dollars."
Re: What are hedge funds, and what social functions do they serve?
#6[deleted]
Re: What are hedge funds, and what social functions do they serve?
#7Notes and errata: Simple answer to the question posed in paragraph two ("How did a few asset managers earn more money in a single year than Pierpont Morgan did in his whole life?"): inflation. ($1.5B in 1913 is about $36B today.) Threshold for becoming an accredited investor is $200k annual income or $1M net worth. Particularly interesting is the overlap between hedge funds and VC investors / angels, considering the…
The author says that J. P. Morgan's estate was worth $1.5bn in 2014 dollars, not in 1913 dollars.
Re: What are hedge funds, and what social functions do they serve?
#8Notes and errata: Simple answer to the question posed in paragraph two ("How did a few asset managers earn more money in a single year than Pierpont Morgan did in his whole life?"): inflation. ($1.5B in 1913 is about $36B today.) Threshold for becoming an accredited investor is $200k annual income or $1M net worth. Particularly interesting is the overlap between hedge funds and VC investors / angels, considering the…
Speculation only, but I'd expect the relative size and scope of the financial industry today vs 1913 to explain that difference.
As in it's easier to earn $1.5bn within 2013's financial industry than it would have been (inflation adjusted) in 1913.
Re: What are hedge funds, and what social functions do they serve?
#9Good article. For lay readers, perhaps you might include a definition of your usage of 'asset manager' (where you reference Blackrock). It's confusing if you don't know the terminology: a hedge fund manages assets sometimes on behalf of institutions, but it's not an institutional asset manager.
Re: What are hedge funds, and what social functions do they serve?
#10[deleted]
You know, it unnerves me how forceful and imperative you are about it. In the authors opinion, hedge funds do serve a social purpose: To regulate volatile markets via arbitrage, preventing bubbles on the high end and undervaluation on the low end.
You can't just enforce an arbitrary rule on something as subjective as semantics.