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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

#71

Post by Terr_ »

IncreasePosts wrote: post #60
asdasdsddd wrote: post #4

1. Crazy graph format lol 2. I thought management fees were supposed to pay for comp? 3. Buying SPY wins again? 4. I don't really care about rich people getting ripped off, but I wonder if any of my money leaks into these funds

Hedge funds aren't necessarily about getting max gains - they can be about decorrelating some of your investments (hence the hedge). So maybe buying SPY would have worked , but people with their money in hedge funds probably already have a bunch of investments correlated with SPY.

> they can be about decorrelating some of your investments (hence the hedge).

As a tangential caution to readers: Remember that where you work is something you want to diversify for: Put a bit more into things that won't go bust around the same times you lose your job.

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

#72

Post by ptero »

financetechbro wrote: post #59
barumrho wrote: post #55

Shouldn't this problem self-regulate, though? Ultimately, investors mainly care about the returns and if you can get better returns elsewhere due to these fees, they will switch. If they can charge large amount of fees and still stay competitive, then good on them, right?

Perhaps. But HF capital is usually locked down for a few years. So there is some friction to switching

True, but I believe (although last explored this question a long time ago) that the majority of the capital is not locked.

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

#73

Post by pkkkzip »

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.

You just aren't as special or interesting as you think to them. Think about this, there are many finance focused graduates with several years of experience in that industry (buy-side im presuming from your comment) and being able to code isn't as special as SWE think it is.

This is another case of software devs thinking they can crack finance/trading because they know how to code. The myopia comes from the difference in culture and how risk is treated from tech organizations to finance.

Exception is if you have an advanced math/physics degree that will be useful in the domain of quant shops but I wouldn't recommend someone taking that route just because they want to make money.

There are lot of finance/trading jobs. I wouldn't waste time pursuing that field. Very few end up parachuting with a mid six digit figure salary even inside that industry and these are people with many years of finance specific experience.

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

#74

Post by clove »

IncreasePosts wrote: post #60
asdasdsddd wrote: post #4

1. Crazy graph format lol 2. I thought management fees were supposed to pay for comp? 3. Buying SPY wins again? 4. I don't really care about rich people getting ripped off, but I wonder if any of my money leaks into these funds

Hedge funds aren't necessarily about getting max gains - they can be about decorrelating some of your investments (hence the hedge). So maybe buying SPY would have worked , but people with their money in hedge funds probably already have a bunch of investments correlated with SPY.

That's no longer true and hasn't been for a long time. While the name comes from that concept, the "hedge fund" is now just any fund marketed to accredited investors.

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

#75

Post by thaumasiotes »

barbarr wrote: post #33
asdasdsddd wrote: post #4

1. Crazy graph format lol 2. I thought management fees were supposed to pay for comp? 3. Buying SPY wins again? 4. I don't really care about rich people getting ripped off, but I wonder if any of my money leaks into these funds

Ok so in defense of their voronoi graphs, if they used a segmented bar or pie chart instead, you wouldn't be able to see the small quantities clearly, and if they used circles of different sizes, it would be easy to mistake the radii as the measured quantity instead of the area. Similar issue arises with lengths/widths if you use rectangles. Their visualization nudges you to compare areas which is a good feature imo.

> and if they used circles of different sizes, it would be easy to mistake the radii as the measured quantity instead of the area

No, if the measured quantity is represented as the radius, everyone will assume it's the area, and you've designed a very bad graph. If the measured quantity is represented as the area, everyone will assume it's the area, and you're fine. The area is what you can see.

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

#76

Post by tombert »

pkkkzip wrote: post #73
tombert wrote: post #40

Earlier quoted context omitted.

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.

You just aren't as special or interesting as you think to them. Think about this, there are many finance focused graduates with several years of experience in that industry (buy-side im presuming from your comment) and being able to code isn't as special as SWE think it is. This is another case of software devs thinking they can crack finance/trading because they know how to code. The myopia comes from the difference…

I don't really think I'm terribly special. As I said in sibling comments, I have been trying to break into more of the software side, not the quant stuff. I don't think I need to be special in order to try to break in, as long as I set my expectations to "it's a long shot" mode.

I do think that I could learn any level of quant if I really wanted to, but I would rather focus on the software stuff.

I have about half of a PhD in theoretical computer science, but that's not usually the "math" that's useful in finance, outside of the software side.

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

#77

Post by tombert »

anitil wrote: post #67
tombert wrote: post #40

Earlier quoted context omitted.

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 have found (in other areas - supply chain, hardware, mech eng, finance) that it's much easier for people to move from in to tech than the other way around. I'm not sure if that's because other fields require proof of capability (like a bachelors) whereas tech seems more welcoming to someone from other backgrounds.

I think it's partly because "tech", as a career path, is relatively new, so its requirements aren't really as "solidified" as a lot of other fields.

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

#78

Post by SideQuark »

mjfl wrote: post #69
SideQuark wrote: post #63

Earlier quoted context omitted.

Hedge funds don’t magically take your money any more than Santa Claus takes your money. Pretty much none of your claims are true, unless those actors desire to be in a hedge fund (same as any place to invest). For example, social security is prevented by law from investing in anything except specially crafted Treasury bonds. Sovereign wealth funds are not “ordinary people’s money.” Union pensions are controlled by un…

I was wrong about the social security system, which I must have gotten confused with some kind of pension system, like CALPERs, which used to invest in hedge funds before pulling out in 2014, but still allocates 40% of its portfolio into private equity [1], which may be worse than hedge funds for reasons I have discussed elsewhere. Everything else I said was true. > Don’t want one, invest elsewhere. Ordinary people h…

> 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 annualized return of 11.8%, compared to 8.9% for public equities, 2.4% for fixed income, and 7.7% for real assets. With traditional asset classes like bonds struggling to keep pace with inflation, CalPERS is looking to private equity to help them meet their long-term investment goals."

So yes, if you want worse returns, continue to believe unsupportable things. If you want to manage people's money, then choose well, and this is chosen well.

>Ordinary people have little control over what their pension funds invest in, and typically are not informed on these issues.

Which is good, because they also are not generally capable to manage their investments with as good as returns (otherwise every little mom and pop would beat PE, which is extremely far from the truth).

A google scholar search on PE returns versus public, top several hits that give numbers to the question:

https://www.joim.com/wp-content/uploads/emember/downloads/P0... - PE outperforms

https://openurl.ebsco.com/EPDB%3Agcd%3A7%3A13677223/detailv2... "The model illuminates why, over the short term, private returns are superior to public ones, whereas over the long term, public and private returns are largely interchangeable after proper adjustments are made, resolving a long-standing conundrum"

https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12154

"We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. "

It's best not to invest with emotion, but with knowledge. Knowledge comes from analyzing markets and reading financial industry research, not repeating misinformed tropes.

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

#79

Post by tombert »

RhysU wrote: post #64
tombert wrote: post #40

Earlier quoted context omitted.

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.

Find a recruiter.

Easier said than done! When I've reached out to finance recruiters, even for stuff that I'm more or less qualified for, they pretty much always ignore me. One of them flat out told me that they will only work with people with a bachelors from a "Top 20" school, which I definitely do not.
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