why do people invest in hedge funds

>>1976510
too much money and don't know what to do with it

>>1976510
Hedge funds USED to be an incredibly successful alternative to traditional investing for the rich. Back when everyone was picking stocks (and paying stupid fees to their stupid brokers), hedge funds could outperform despite the 2/20 fee structure. Also, there were far fewer player players chasing alternative investments and mid-sized M&A back in the day. So back then, hedge funds truly were a "hedge" against flat or declining markets.

Today, hedge funds don't even try to hedge anymore. They just seek straight alpha, and in that regard they can't complete with index funds. Not after you deduct their fees, which haven't changed in decades. Why would institutional and HNW clients pay 2/20 to a hedge fund when they can pay 0.05% to Vanguard and get better net returns?

But momentum is still a thing, and the old ways take a long time to die out. And, in a sense, a proportionate allocation to a hedge fund is a form of diversification even for someone who puts most of their assets into index funds. Some high risk/high reward plays are worth the gamble, even for conservative long-term investors. Active management, including hedge funds, won't be going away completely ... but the steady decline will continue.

>>1976545
A real answer? On /biz/?
Godbless you anon

>>1976510

Ignorance mostly.

Speaking about that someone tell me if this is a scam or not?: https://automatafx.com/

some anon posted it in another thread and it looks too good to be true

>>1976598
>Ignorance mostly.
I highly doubt that ignorance plays even a small part of it. You have to be an accredited investor or a large institution to invest in a hedge fund. People and institutions with a substantial net worth ($1-2 million +) and serious investable cash (at least $500K starting investment) tend not to be ignorant folks.

That doesn't mean they always do smart things with their money, of course. But I'd tend think denial and ambivalence are far more common than simple ignorance among these people.

>>1976545
Interesting history. Thats what I figured. Some of these finance companies are up against so much competiton now that there isnt much room to vacuum up profits from thin air.

>>1976611
>forex
It's a scam. 100%

Forex is roulette with worse odds and a higher rake.

>>1976614
>Some of these finance companies are up against so much competiton now that there isnt much room to vacuum up profits from thin air.
Can't underestimate this. When companies like Comcast, Google, Cisco, Verizon, and Lilly have some of the world's largest in-house VC/PE departments, it's getting harder and harder for white-shoe Wall Street hedge funds to get good deals.

>>1976515
This?

its a dying business. everyone just puts money into vanguard now.

hedge funds are useful during down cycles. the top quant funds also still kill it.

>>1976545
On top of that the post-2008 regulations are killing the hedge funds. All of that compliance officer rules, otc margin rules etc. As a result it limits the flexibility of the hedge fund and imposes constant operational costs on the managers.

It sucks because the TBTF banks were responsible for the crisis, not a hedge funds, where a hefty chunk of assets belongs to the partners and they risk their own money.

>>1976611
Always ask yourself this question when considering programs like this.
If you invented something so robust, so profitable, do you release it?

Imagine I have an algo that accurately predicts the market. Why would I sell that to the public when I could take a loan and be a billionaire in no time?
Unless of course the algo isn't so good.

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contrary what the common belief is hedge funds on average have outperformed dow and sp500 both in absolute terms and risk adjusted returns

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barclay did study 3000 hegde funds since 1997 - 2016 the outperformance was very clear. 2002 market tanked over 20%, hfund performance was slighly positive. 2008 the drawdown was about half of the market.

>>1976612
People who don't work in Finance dont know the techniques Hedge Funds use to Jew you. Do you really think a couple who are both doctors with 3M to invest is going to know shit about finance when they work 80 hour weeks and barely have time for the kids?

My dad is worth about 2M from the construction industry and he didn't even know about futures and options until I told him about it. The truth is a large majority of people outside of finance don't know anything about it.

>>1977456
index funds make up only a third of the us equities market

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>>1977683
>People who don't work in Finance dont know the techniques Hedge Funds use to Jew you.

Amen to that. Using their high water mark to base the performance fees on instead of their actual results is a shameless jew move if ever there was one.

>>1976612
I deal with accredited investors all the time, they for the most part are good at one thing (which is why they have their money) and practically know nothing else

>>1978048
Meh, that's a gross generalization without context. Your average "millionaire next door" isn't putting their money in hedge funds and never did. They wouldn't have access to the fund back in the old days. Even today, it's not like you apply online -- it's still very old school, small network stuff.

I think the people who invest in hedge funds know what they're getting into. It's still not an adequate explanation why they choose a suboptimal strategy, I admit. But to generalize and dismiss hedge fund investors as unsavvy in matters of money strikes me as factually incorrect.

>>1977495
>Program algo A which sends a buy signal
>Program algo B which buys stock 10 minutes before algo A and sells 10 minutes after
>Publicize and promote algo A
>Use algo B yourself
Why wouldn't this work?