Two Hedge Fund Managers Walk into a Bar

This one is priceless, and I have been remiss in not posting it.  Reminded most recently by the link at Maggie's Farm.  Excerpt, but the whole thing is great:

"Here's the problem. Most hedge funds are indistinguishable from mutual funds, other than the fact that they feel entitled to charge 30 times the fees."

"Two percent of assets for showing up in the morning, and 20% of any profits."

"There are probably 100 hedge funds that will consistently beat the market after fees. They won't take your money. They provide just enough hope for investors to keep the rest of us in business. We earn half the performance of index funds, charge 30 times the fees of mutual funds, pay half the income tax rates of school teachers, have triple the ego of rock stars, and fewer disclosure requirements than the NSA."

"We're basically a conduit between public pension funds and Greenwich real estate agents."



  1. BGThree:

    In the same vein as your other post about the two parties staking out opposite positions and defending them passionately solely because they are opposite, a solid majority of Republicans would be offended by these tasteless jokes as communist drivel typical of a cop hating soldier hating pinko muslim community organizer blog. The opposite of tiresome liberal tirades about income inequality is pretending that the vast majority of investment bank and managed fund activity, not to mention high frequency trading, is something other than a parasitic drain on the productive economy that serves no legitimate purpose like efficient allocation of capital. ("Creating Liquidity" is not a legitimate purpose for generating transactions that frontrun legitimate market participants, no matter how many times octobox heads on CNBC scream that it is). Transactions that are entered into for no reason other than sucking up transaction fees or using superior market position/information to arbitrage their clients so hard their prospectuses come with a hemorrhoid pillow. At least hedge fund victims are voluntary victims. Pension fund victims and HFT victims are forced to just take it - sit back, close your eyes and think of Greenwich.

  2. J Calvert:

    Hedge funds operate the same as sports handicappers and boiler room stock scams. Start 10 funds with a 20% up /80% down risk profile, and raise capital. After 5 years of taking 2% of assets and 20% of returns, close down the funds that lost money and tout the ones that are up 20% annual return.

    Rinse and repeat.

  3. slocum:

    "One dollar invested in the Barclay Hedge Fund Index in 2004 would worth be worth $1.88 by 2014. In the S&P 500 (SNPINDEX: ^GSPC ) , it would have grown to $2.32."

    Which is why my retirement money has been in index funds for decades. Now if I can just figure out the trick (other than, obviously, never moving to Illinois) of not being tapped to pay for the all the investment shortfalls hedge-fund 'invested' public pension funds, I'll be golden.

  4. irandom419:

    My 401k options do not include any index funds and consistently are 1% below the SP500 at best I finally felt better enough to look closer and saw a 70% turnover rate. In any other scenario that would be called churning and bring penalties.

  5. A Friend:

    Hedge funds can and do employ leverage, mutual funds can't. Depending on the period observed, that will create outperformance or underperformance assuming similar asset mixes. Don't confuse the structure with the asset mix. Comparing the S&P 500 to the Barclay index of all hedge funds is stupid. You could only compare the S&P 500 to a large cap only hedge fund.