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Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

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Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#101

Post by fakedang »

tombert wrote: post #40
neilv wrote: post #22

It's nice to see that hedge funds are still around. I thought all the bros had switched to tech.

I've tried for the last several years to go the other direction: tech -> finance. I've sent thousands of applications to hundreds of trading and finance companies, and gotten zero bites in the last two years. I am currently just assuming that there aren't as many finance jobs as there are jobs at big tech.

I co-run a quant-driven prop shop. We never did and still don't do inbound recruiting, only outbound and referrals. It's the same with almost all quant shops now in the EU. I guess the US would be different, but only slightly - I guess every small quant shop does the same across geographies.

Also there are only a handful of big quant shops or hedgefunds actively seeking heavyweight quant guys.

The industry in general has moved to a strategy of doing more with less.

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#102

Post by SideQuark »

mjfl wrote: post #85
SideQuark wrote: post #78

Earlier quoted context omitted.

> which may be worse than hedge funds PE obtains higher returns than public funds simply because they have more options to invest in. They can put the cash into anything public invested funds can choose, AND a massive range of other projects. CalPERS is not an ignorant investor. They see the results, and they allocate accordingly. From your own link : "Over the past ten years, private equity has delivered an annualiz…

I would argue the CalPERs does not know the return of its private equity investments because private equity is a recent phenomenon and one that locks up funds for 4-7 years, and I would predict that its realized returns will be disappointing. The financial literature is a crapshoot filled with selection bias that I wouldn't consult for anything. Rather, I will rely on my personal experience which is: private equity i…

I don’t understand why so many people in this thread keep posting trivially easy to check incorrect claims.

Private equity, in the modern form, has been used since before 1950. It’s trivial to check.

CalPERs provides detailed annual reports with returns broken out. No one runs a nearly half trillion fund and “does not know the return of its” component investments.

I’m glad you trust your limited, obviously emotionally driven, demonstrably lacking in knowledge at every comment in this thread, beliefs over market data. You demonstrate to others why so many people are not going to do well handling their own pensions compared to those using proper methods.

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#104

Post by mjfl »

SideQuark wrote: post #102
mjfl wrote: post #85

Earlier quoted context omitted.

I would argue the CalPERs does not know the return of its private equity investments because private equity is a recent phenomenon and one that locks up funds for 4-7 years, and I would predict that its realized returns will be disappointing. The financial literature is a crapshoot filled with selection bias that I wouldn't consult for anything. Rather, I will rely on my personal experience which is: private equity i…

I don’t understand why so many people in this thread keep posting trivially easy to check incorrect claims. Private equity, in the modern form, has been used since before 1950. It’s trivial to check. CalPERs provides detailed annual reports with returns broken out. No one runs a nearly half trillion fund and “does not know the return of its” component investments. I’m glad you trust your limited, obviously emotionall…

You misunderstood the meaning of what I said. Private equity has existed for a long time, but as an asset class has it had a huge boom for the past 20 years, gaining market share that it never had. This trend has been recognized by several media outlets. This article in Moonfare shows the private equity AUM has roughly tripled in the past 15 years and the number of private equity funds quadrupled between 2012 and 2021 [1]. This article by Citizens Bank documents the exponential rise in the number of companies owned by private equity while public has remained flat [2]. Another article discussing the exponential growth can be found here [3].

I guess I wasn't super clear, but anyone who's worked in the actual industry would have understood what I meant. And the fact that you didn't suggests to me that you don't have a lot of practical experience, or if you do you are stunningly aloof to the workplace discussions of your colleagues.

People who actually work in the industry would also be familiar with the fact that, yes in fact people who run funds with a half trillion under management can be stunningly unsophisticated and simply go with flashy new trends - like private equity! This has been commented on in several industry podcasts.

And again, your reference to academic studies in the financial field which, despite some people like AQR using them in their marketing, most practitioners seriously discount due to the severe problem of selection and survivorship bias, makes me believe you actually don't have any idea what you are talking about.

Actually you've said a lot of absurd things:

> Hedge funds don’t magically take your money any more than Santa Claus takes your money.

Again, people don't generally control what their pension fund invests in.

[1] https://www.moonfare.com/pe-masterclass/private-equity-marke...

[2] https://www.citizensbank.com/corporate-finance/insights/priv...

[3] https://www.dakota.com/resources/blog/private-markets-on-the...

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#105

Post by mjfl »

bormaj wrote: post #24
mjfl wrote: post #17

As someone who has worked in the industry: hedge funds are certainly parasites on our society, who make money not from wealthy clients (as is widely thought) but by managing government money through the social security system, union pension funds, college endowments, and sovereign wealth funds. They are a tool to redistribute billions of dollars of ordinary people's money into the pockets of an 'in-group' that then u…

As someone else in the industry, is it fair to categorize all HFs this way?

funds with high 'skin in the game' as in high amounts of manager net worth in the fund, tend to be an exception to what I'm saying.

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#107

Post by yieldcrv »

ddmitriev wrote: post #94
yieldcrv wrote: post #8

I agree that's a problem to be discerning about - and it may be impossible to be discerning about - I also think people are looking for any reason to just "index" and purchase the S&P 500 or VOO ETFs like A) from being ineligible to be in hedge funds, and then B) to justify their fear but hedge fund returns are not able to really be aggregated so simply, there have been attempts, I can pull up whatever article you're…

This does not sound right. Maybe venture capital funds work this way? (I wouldn't know about them.) But with regular hedge funds, you are joining a portfolio and you do get the return even on the positions that were in place at the time you invested. The only differences between investors that may affect the return that is allocated to them are a) their share classes, which may affect investment terms such as fees or…

Sidepockets throw that difference off

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#108

Post by SideQuark »

mjfl wrote: post #104
SideQuark wrote: post #102

Earlier quoted context omitted.

I don’t understand why so many people in this thread keep posting trivially easy to check incorrect claims. Private equity, in the modern form, has been used since before 1950. It’s trivial to check. CalPERs provides detailed annual reports with returns broken out. No one runs a nearly half trillion fund and “does not know the return of its” component investments. I’m glad you trust your limited, obviously emotionall…

You misunderstood the meaning of what I said. Private equity has existed for a long time, but as an asset class has it had a huge boom for the past 20 years, gaining market share that it never had. This trend has been recognized by several media outlets. This article in Moonfare shows the private equity AUM has roughly tripled in the past 15 years and the number of private equity funds quadrupled between 2012 and 202…

You completely miss the reason it's grown, and complain through repeated ignorance.

It's grown because it has proven itself, tends to outperform public equity, and provides asset diversification.

It would be dumb for any asset manager to ignore the evidence. I'd certainly fire any asset manager that trades on voodoo while ignoring such signal.

As to working in the industry, you should check my comment history. I've done modeling and fundamental algorithms for a huge range of industries, including new pricing algorithms I developed for investment houses. I have a PhD in math, degrees and grad work on CS and physics, taught graduate mathematical econ at a top 50 univ, and have done significant work and consulting for finance places. So I sorta do know about this.

As to your implication that you do work in this industry, you clearly don't. Just checking your comment history though shows you doing this level of uninformed commenting on topics and people correcting you just like here, going back a far as I checked.

So no, you have no idea about the industry any deeper than someone who read a blog post.

> This has been commented on in several industry podcasts.

OMG! Commented on in podcasts? Now I believe. For complaining that others can be unsophisticated, you cite this drivel as evidence, against the peer reviewed, track record researchers I posted above?

It figures. Keep cherry picking siloed low information sources to bolster your beliefs. I'll take widely sourced, properly done analysis.

Go ahead and post more. This has more than run it's course

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#109

Post by psytrancefan »

namuol wrote: post #18
mjfl wrote: post #17

As someone who has worked in the industry: hedge funds are certainly parasites on our society, who make money not from wealthy clients (as is widely thought) but by managing government money through the social security system, union pension funds, college endowments, and sovereign wealth funds. They are a tool to redistribute billions of dollars of ordinary people's money into the pockets of an 'in-group' that then u…

Any advice to reform things? As individuals or as a collective?

How about mind your own business?

The main problem to me is everyone wants to tell everyone else what to do "for the good of society" but over my lifetime this has been a slow acting cultural poison.

Less than 20 years ago it cost me $7 a trade for one side and that was the cheap revolutionary price for the retail investor. Today it cost me ZERO. That is because of hedge funds. I doubt this will last forever because someone will come along and "fix" what is not broken "for the good of society".

Re: Hedge Funds Are Pocketing Much of Their Clients' Gains with 'No Limit' Fees

#110

Post by mjfl »

SideQuark wrote: post #108
mjfl wrote: post #104

Earlier quoted context omitted.

You misunderstood the meaning of what I said. Private equity has existed for a long time, but as an asset class has it had a huge boom for the past 20 years, gaining market share that it never had. This trend has been recognized by several media outlets. This article in Moonfare shows the private equity AUM has roughly tripled in the past 15 years and the number of private equity funds quadrupled between 2012 and 202…

You completely miss the reason it's grown, and complain through repeated ignorance. It's grown because it has proven itself, tends to outperform public equity, and provides asset diversification. It would be dumb for any asset manager to ignore the evidence. I'd certainly fire any asset manager that trades on voodoo while ignoring such signal. As to working in the industry, you should check my comment history. I've d…

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