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Domestic Fund Formation It is a simple process to enter the hedge fund industry; practically anyone with $15k to $20k can start a hedge fund and forming a hedge fund gets easier every year.
Offshore Fund Formation An offshore hedge fund is simply a structure used by hedge fund managers as a way to attract offshore investors (non-U.S. citizens) or U.S. tax-exempt investors such as pension and endowment funds.
Hedge Fund Blog
Low cost or low risk?
Which is better for investors? Low cost or low risk? Low fee beta or high value alpha? Should you invest with dedicated, hard working highly skilled portfolio managers that reduce volatility OR in a no work, unskilled speculative fund that just tracks an unanalyzed basket of 500 stocks S&P happen to like, with no attention to valuation or risk? Which would a prudent man or ERISA compliant retirement plan REALLY chose? 2 and 20 for alpha is a bargain compared to 18bp for non-smart beta. Jack Bogle steals peoples’ precious time waiting years for dumb and volatile indices to rise....
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Hedge fund billionaire?
Low fee is not low cost. Jack Bogle likes “cheap” index funds. I don’t know why as they are risky and expensive considering the heavy losses, limited “work” involved and lack of skill. Lose a large percentage of investors’ hard-earned money? It’s the market’s fault not theirs, right? Two 50% drawdowns last decade alone. What intelligent person would invest in such hazardous toxic waste as a passive index fund?Get someone to make a list of stocks for a benchmark, track them, and then endure years below a high water mark. Which prudent man would...
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Efficient market
Efficient Markets Hypothesis? In the REAL world we have Emotional Markets Hysteria. Every security at all times is mispriced. Markets are not rational at reacting to new information. Data is either overreacted or underreacted to and nothing ever trades at fair value. The growth and sustained success of hedge funds proves the existence of and ability to exploit mispricings and inefficiencies.Some claim that widely followed securities are efficiently priced but even in liquid markets I have found that the more participants then the more mis-priced that market is. The more money in an asset, the...
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Arbitrage hedge fund
Arbitrage? There is more DUMB MONEY invested in the markets than ever before. So there are more opportunities to arbitrage dumb investors than ever before. Tenured economics professors claim there is no such thing as a persistent arbitrage as it supposedly would be copied and therefore eliminated! They are so wrong. If you have the intelligence and resources there are plenty of arbitrages available on Wall Street just as money is found on other streets. Nickels in front of steamroller strategies are silly ideas where “star” traders and Nobel laureates risk client capital for 5...
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Please avoid hedge funds
A friend just ate at a top restaurant. As she related the gourmet experience, I wondered if economists would claim she was ripped off. Nearby was an even more famous restaurant which served many more clients and had a longer track record. Eating there cost just a few dollars compared to several hundred where she ate. I asked about her irrational decision avoiding “cheaper” food but she said while aware of “lower” cost products, differences in SKILL, EXPERIENCE and VALUE were accurately reflected in comparing three star Michelin chefs with McDonalds...
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The Biggest Risk
The quant is dead – long live the quant. The huge outperformance of quant and systematic strategies has been a consistent feature of skill-based portfolio construction for over 250 years. However the area is highly kurtotic. 5% of quant strategies are exceptionally good and they capture alpha from 95% of quant strategies that are exceptionally bad. There is no “average” quant fund! ALWAYS do the opposite of “advice” from “Nobel” prize “winners” in economic “sciences”. Hedge fund geeks bearing greeks? Some models don’t...
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Economics Nobel prize
Nobel prize? Pricing options correctly is hard but finding dumb ideas is easy. The 1997 award to Myron Scholes and Robert Merton and that is with the bar set very low in a dismal field. The Black-Scholes “formula” has led to many problems for investors but is still used to misvalue options. Fake “Nobels” are yet more 1960s economics lunacy that must be put out of its misery. Anyone using stochastic calculus to “price” derivatives is wrong. But I am glad they exist so they can transmit their random negative alpha into my deterministic positive alpha. Win the...
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Sports hedge fund
Sports hedge fund? Real diversification? Unlike stocks, bonds, real estate and commodities, sports results don’t depend on the economy. Sports bets offer consistent arbitrages and mispricings just like those “efficient” financial markets. Diversify PROPERLY with new sources of performance. Focus on building return streams. The economic fortune tellers are irrelevant to professional investors. Some say skill doesn’t exist! Maybe PelĂ©, Jack Nicklaus, Michael Jordan, Wayne Gretzky, Babe Ruth and the greatest sportsperson ever, Donald Bradman, were just lucky flukes like...
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Wealth management
Why are only the wealthy allowed to invest with top money managers? Ancient laws make managers not skilled enough to run hedge funds available to Mom and Pop but stop them accessing the best talent. Why should the merely affluent make do with managers that aren’t good enough to work at hedge funds? People are free to drink, smoke, gamble and consume junk food yet regulators “protect” retirees from the best investment opportunities products. Long only is wrong only. Real estate brokers are allowed to sell houses and subprime mortgages to overleveraged buyers MANY of whom...
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Machines v humans
Beware of hedge fund geeks bearing greeks? Some models don’t work so all models don’t work? Black box alpha is complicated so stay with “simple” beta? Humans do all the programming at quant funds so it is their sagacity or stupidity driving results. It depends on the questions people ask their computers. If you input the wrong questions with wrong assumptions then the “answers” will be incorrect. Blame the mechanic or the oily rag? I’ve heard many times that quant investing will replace humans but conversely I am hearing, yet again, that “this...
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