What is your perception of hedge funds?

Question

What do you know about them? What are your views about their culture and the sort of people they attract? No wikipedia answers please :)

Answer 1

They are high risk but you can achieve superior returns. Usually you have to have a large amount of money to invest $500,000 for most funds and I believe you have to be a certified investor also, meaning a net worth of at least $1 million. Only very sophisticated and wealthy investors should entertain the thought of investing.

Answer 2

hedge funds (and private equity shops) have been getting an immense amount of bad publicity lately because of high profile executives that wanted to be high profile, and by firms that are currently or have gone public.

Just like during the '80s when investment bankers got a bad rap for their excesses, it's always the few that come across as being representative.

Hedge funds do not all manage tens of billions of dollars. I don't have the stat, but 10% of the hedge funds out there manage 75% of the money. There are tons of smaller funds with a few people and assets in the millions.

The culture is a meritocracy - there isn't much room for politics because everyone's contributions can be easily measured. HF's tend to attract a younger crowd that likes the fast-paced work environment.

Having said that, hedge funds like SAC Capital may make large trades every couple of minutes, while other funds take a much more long term approach to investing.

Everyone, though, is attracted to atleast some degree by the money.

Answer 3

Firstly, hedge funds are not regulated as strictly as mutual funds for example and can be more 'creative' with their investment methods.
They can make money in a falling market by going short, or a rising market by going long.They can create derivitives which are financial instruments which, with degrees of probability,are assumed to never lose.However there are many cases where so called rocket scientists have got it completely wrong!
Please remember markets are erratic, no mathematical formula out there can predict the markets. Ask yourself ,if someone could predict the markets, do you really believe they would share it with you?
The hedge fund operators are arrogant, grossly overpaid and have a supremely,simplistic view of how markets work.

Answer 4

From the investor's viewpoint, care must be taken to ensure that investment is made only in funds that have rules to ensure compliance with the investor's requirements. These rules vary between funds and presumable range from the ultra conservative to the virtually reckless.

From the State's viewpoint, the combined action of hedge funds can destabilise a country's economy and enable financiers to have disproportionate influence on governments.

Not having tens of millions to invest, Hedge Funds are not a subject I have ever studied in detail.

Answer 5

They are a way for the managers to control a lot of money, Charge big fees and not be accountable to anyone. Most have restrictive rules. The investor has to put a in million dollars some are less. and there is no withdrawals allowed for extended periods, up to several years. The fees are paid regardless of the performance of the mangers, sometimes 20% and they are very sporadic in their overall performance. They attract the wealthy as another way to invest and the secrecy is probably what they are after.

Answer 6

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Answer 7

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Answer 8

Hedge funds are a VERY diverse bunch. They come in all sorts of sizes and shapes and attract all kinds of people. Jim Simons' Renaissance Technologies, for example, does not hire business school graduates nor people with previous investment management experience; the only people they are interested in are individuals with published research in any quantitative discipline (which they actually review prior to asking the person if they'd be interested in working for the firm). Jim Simons himself is a noted mathematician, who in his past lives won the American Mathematical Society's Oswald Veblen Prize in Geometry and single-handedly transformed the math department at SUNY Stony Brook into one of ten best in the U.S.

Answer 9

Don't know too much about them, except they may be high risk (you could lose your money) but if they work out you could make a lot of money.