There is something in the rationale of people choosing hedge funds as a vehicle that I am not getting. The sales pitch must be amazingly slick or people are still captive to the false narrative that hedge funds are enrichment vehicles for someone other than the manager.
Investors poured $70.9 billion into hedge funds in the first seven months of 2014, despite average returns of only 2.82% year to date.
New data from Eurekahedge shows European hedge funds took in $33.4 billion as of July 2014, up from $29.4 billion last year at this time.
North American hedge funds now manage more than $1.4 trillion, having added $62.6 billion as of July 2014.
Long/short equity, fixed-income and multi-strategy funds remained the three most popular strategies in terms of investor allocations, attracting $55.5 billion, $15.6 billion and $10.1 billion, respectively, over the monitored period.
Source – FINalternatives
The evidence is overwhelming that if you want simple equity exposure then you are much better off buying an ETF – your performance will be staggeringly better than the hedge fund you choose and you wont be reamed by fees.
To take in $33B in a year might suggest that there is more than “one born every minute” Unless there is some significant benefit that is either so simple and blindingly obvious that it is easily overlooked or its some convoluted and esoteric, that only the brokers understand it and can explain it. Not having ever talked to a broker about such matters, I could not comment on the later and if its the former than its hidden to me.
Cheers