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How We Crushed Wall Street's Biggest Hedge Funds in 2015
It's possible that there is no such thing as a truly bad year for a hedge fund manager; Wall Street's "Masters of the Universe" enjoy a unique prestige, along with the best that New York and London have to offer.
Their performance doesn't warrant that mystique, though.
You see, in 2015 the hedge fund investors who entrusted their money to the "Masters" saw their worst returns in four years, according to BarclayHedge Alternative Investment Databases' Hedge Fund Index.
They saved a fortune in capital gains taxes, it's true, but those investors booked a paltry 0.31% on average. An investor placing $1 million under management with the "average" fund would have earned just $3,100 on that money.
That's $3,100 before fees, of course. In practice, investors pay the fund 2% of their principal for the privilege of having their money "managed" by one of those Masters of the Universe, along with a 20% performance fee that's typically over some hurdle rate or return on investment.
On Wall Street they call that the "Two and Twenty." We call it bad money after good. There's just no other polite way to describe paying $20,000 for the privilege of booking $3,100.
But... in that same year, we showed that research-driven, independent investment can bring returns that crush the "Masters of the Universe," many times over. In any market, too.
It's possible that there is no such thing as a truly bad year for a hedge fund manager; Wall Street's "Masters of the Universe" enjoy a unique prestige, along with the best that New York and London have to offer.
Their performance doesn't warrant that mystique, though.
You see, in 2015 the hedge fund investors who entrusted their money to the "Masters" saw their worst returns in four years, according to BarclayHedge Alternative Investment Databases' Hedge Fund Index.
They saved a fortune in capital gains taxes, it's true, but those investors booked a paltry 0.31% on average. An investor placing $1 million under management with the "average" fund would have earned just $3,100 on that money.
That's $3,100 before fees, of course. In practice, investors pay the fund 2% of their principal for the privilege of having their money "managed" by one of those Masters of the Universe, along with a 20% performance fee that's typically over some hurdle rate or return on investment.
On Wall Street they call that the "Two and Twenty." We call it bad money after good. There's just no other polite way to describe paying $20,000 for the privilege of booking $3,100.
But... in that same year, we showed that research-driven, independent investment can bring returns that crush the "Masters of the Universe," many times over. In any market, too.