Now throw in something for the 2-and-20 crowd, namely private equity managers, venture capitalists, hedge fund operators and funds-of-hedge-funds operators.
In a new paper, Jingzhi Huang of Penn State University and Ying Wang of SUNY-Albany examined the performance of 73 hedge fund-like mutual funds during the 2007 financial crisis.
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He says the relatively high costs of hedge funds versus mutual funds--hedge fund managers typically charge a 1% to 2% fee plus 20% or more of any profits for the fund each year--don't make them the best option for most individual investors.
Others either operate funds-of-hedge-funds (Goldman Sachs) or have set up separate hedge-fund arms (Gartmore and less successfully of late Bear Stearns).
His smaller leveraged fund was one of the best-performing hedge funds in 2012.
Their competence and duty to advise seemingly encompasses anything a fund may encounter- asset allocation, manager and fund performance, personnel turnover at managers, real estate, private equity, international and emerging markets, hedge funds, fund of funds, brokerage-everything but consultant-related issues.
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Last year was the only one of the past ten in which funds of funds did not trail the company's hedge-fund index.
Over the last few years, mutual fund companies have rolled out dozens of funds that mimic high-priced hedge funds.
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"Every Tom, Dick and Harry is putting out a shingle, " laments Elizabeth Hilpman, a partner in Barlow Partners, a seven-year-old New York hedge fund of funds.
If not, why is the pension comparing performance of its hedge funds against a hedge fund-of-fund benchmark which involves additional layers of fees and is easier to beat?
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But what the data do not do is compare hedge fund performance with that of mutual funds--those comparatively boring investment pools for ordinary mortals.
One of the best-known hedge funds, Soros Fund Management, admitted that it chewed over the sell signal given by the Big Mac index when the euro was launched, but then decided to ignore it.
For their trouble, opportunity funds charge hedge-fund-like fees of 1.5% or so of committed capital plus a 20% cut of profits.
With their staid institutional clients, funds of funds have helped to tame hedge-fund managers.
Hedge-fund managers usually have a large amount of their capital invested in their funds reason, indeed, why some of them have become billionaires.
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But he does cite a poignant case of an anonymous San Francisco hedge-fund manager who had gone short on Sanchez Computer when other funds were going long.
"I don't like putting all my money with one guy, " says Altfest, who only recommends one hedge fund investment to clients--and that is a fund of funds (despite the higher fees).
So far, government prosecutors have mostly focused on the lower level contributors to the current financial meltdown, such as mortgage brokers who approved fraudulent applications, and some hedge-fund managers at Bear Stearns who allegedly misrepresented the health of their funds.
Meanwhile, investors in America and abroad including the sort of pension funds that have recently stocked up on their hedge-fund investments are smarting.
The hedge fund firm, run by 38-year-old Mark Angelo, did note that the activities of hedge funds and their managers have been subject to increasing regulation and oversight.
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But too many hedge funds bought more of the entering stocks than the index-fund managers needed.
Morgan Stanley, for instance, sponsors a fund of funds, Liquid Markets Fund I, that puts investors' money into an assortment of hedge funds that each impose one-way incentive fees (plus annual management fees).
Were corporate pension funds to switch even a small proportion of their portfolios, the hedge-fund industry would receive a handsome inflow.
Now we hear allegations that hedge fund managers have select, preferred customers who can move in and out of funds hassle-free while other investors remain stuck.
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