Is the trust economy the start of the downfall of Wall Street?
The guys behind Aspiration think it can. They are basically creating pooled funds to buy into hedge funds, O&G exploration, and other accredited investments. Sound like a traditional mutual fund? Well the difference is these guys are taking 0% commission or service fees. They are leaving that up to the customer to decide.
While I don't think this will cause the downfall of the traditional placement banks this could very well spell the end of the hedge fund industry. Interested in what you guys think.
Link to the story on yahoo inside the post
http://news.yahoo.com/challenging-inequality--the-uber-way-010138840.ht…
Sounds like a commie to me,and the only good commie is a dead commie.
are they commies or are they just another business trying to beat their peers through competitive pricing and warm and fuzzy marketing? ie 99% of the market?
I think the problem we're going to see is the next generation is a service/savings rather than material possession demographic.
They'd rather save or go on a nice trip than buy a big ass tv or brand new sports car. Just my 2cents that are irrelevant to this topic.
No, this is not the case in the long run. Lives are just being deferred right now. The economy sucked for a long time and people are selfish, so families are being delayed. Once the kids come popping out the consumer economy will come roaring back.
This is pretty much a fact. Dining out, travel, etc have done well during the downturn and are roaring now.
I don't at all see how this could "spell the end of the hedge fund industry". What this is doing is opening up the hedge fund industry to a ton of non-accredited investors, while at the same time passing the headache from dealing with such investors on to someone else (in this case, the investment pool). It sounds like a great way for hedge funds and other alternative investment vehicles to get into the crowd-sourcing idea without having to deal with the downside from it.
The real stupidity is in creating and running such a service at all, much less for free (and don't kid yourself, that's essentially what they're doing). Running a service that provides investment into non-liquid vehicles such as hedge funds and private equity funds is going to be a nightmare when John Q Public can take $500 and throw it into something he has no idea about, and then complain that they stole his money because he doesn't understand the concept of illiquid investments. That's what prevents most people from any kind of crowd sourcing investing - the idea just isn't that attractive when you really think about it.
Anyways, this could be beneficial to funds because of that, but I don't see it catching on because the headache isn't worth the return.
If they are increasing people's ability to put money into hedge funds, how does that harm hedge funds?
Logic'd.
I agree to an extent, I guess an argument could be made that accredited investors have less liquidity needs vs retail so fund PMs don't have to worry about 'weak hands/shorter-term investors' pulling money out like a mutual fund when the underlying are illiquid (i.e. like a distressed debt fund) or at inopportune times. But, I guess we'll find out with some of these '40 act funds with large asset/liability mismatches and daily liquidity get new regs from the SEC.
I'll probably try it out, why not. Its only $500 to get in. I was able to check out loyal3's IPO platform, which got me into gopro's IPO
"Disruptive" in finance ? Not at all. "There were over 100 alternative mutual funds launched last year". http://online.wsj.com/articles/vonnegut-a-surging-wave-of-alternatives-… Herb Vonnegut Everybody is disruptive until the next funding round.
"We trust you to pay what you think is fair." Hold on pal, stop being so predictable. "World class investment team" -who's that ?
There is a trend of the cost of alternative investments going down. With so many players the pie stays the same, but your slice keeps getting smaller. The slice is even smaller for a FoF.
The SEC is investigating alternative funds because of their use of hard to value and illiquid investments.
Also, there is such a thing as the cost of capital for alternative investments. See 2013 Harvard study http://cdn1.valuewalk.com/wp-content/uploads/2014/06/SSRN-id1910719.pdf
The comparison with Uber is misleading. You were still getting into a car with a stranger (cabbie) just as you would now with an Uber driver.
Like you can rent a condo on AirBnb and tell the guy you'll pay him 20 bucks and he goes for it.
this could be the next bubble - alternative investments for all. I wonder if people realize that part of the benefit of alts is illiquidity and control over their distributions. since they don't have to do daily liquidity, they can wait while a thesis plays out rather than forced selling like mutual funds have to do in times of tension.
I'm also a believer that the best money managers tend to reside outside of situations like this so you're probably not getting the best quality managers. if you don't believe active management adds any value, well then this product seems to be a fit.
@"heister" where did your disdain for everything "wall street?" according to some of your older posts, you used to be a broker (like me) pre-inheritance, but recently I'm getting the sense you're a fan of things like robo advisors, motif, crap like that. not passing any judgment, but why the change?
I'm impartial, I just point out things that I see. I don't have a disdain for Wall Street perse, just some of the shit that is going on there lately. I have nothing but respect for the industry, I just find these new comers to be interesting. I am a tech guy at heart, I love to see old dinosaurs of industries uprooted from their foundations and changed for the better by technology.
Fund managers don't reside outside of the situations. They are all in the same bubble, there isn't an inexhaustable supply of the pie for everyone and their cat to exist. A fund manager isn't really judged based on their returns. They are judged on their expansions. It doesn't matter if you have consistently gotten a 22% return year after year if you can't convince anyone that you can get that return for them.
I believe that the industry in general is going to look completely different in 20 years for sure and will likely look very different in less than 10. Some of the advantages people like me have is arcane rules that really do nothing but protect people like me from outsiders breaking in. These rules are going to change, no matter how many tantrums the protected class throws. I have accepted this and I think it positions me to grab an even larger chunk of the global wealth pool going forward.
You guys aren't analyzing the downside properly. As this fund grows it will morph from a collection and distribution house into an investment house itself. If this really takes off, I'm not really sure it will, it can cause the blackhole effect. If I had my money in a hedgefund that worked on a 2/20 why would I not pull my money out and put in somewhere where I could say I am doing a 0/0 load? I'm not saying that hedge fund investing will go away. But rather the hedge funds themselves. If you have a black hole effect that is triggered by lower expenses it will eat away at everything in its path.
If your sharpe is >2-3, money tends to find you and is willing to pay you for your services. Technology and transparency about returns make this process better.
Pick one:
1.) Get returns of S&P500. (Return=10%/year, vol=15%) 2.) Get 25%/year with a vol of 8%, minus 2% in management fees and 20% of returns. (Many top tier firms even charge less)
Most people will pick option #2. And option #2 isn't available without paying a premium for the guys running the strategy. You can do a little better than the S&P 500 by diversifying and buying other risk factors, but even there you're going to be paying 1% to these index ETFs because these strategies aren't easy to execute. And these days that only buys you a few extra percent in returns. Some of those risk factors have become a little too commoditized.
If we're creating actual value for our investors, we shouldn't be afraid of this. I believe our team creates massive value for our investors that they can't get on their own, so I don't see what the problem is. The guys at DE Shaw, Bridgewater, Citadel, GSAM and Kepos probably feel similarly. And the guys at the best traditional funds probably feel the same. Treat your investors well, and more money comes in.
This is not going to kill the hedge fund industry. It could concentrate it and deflate some of the sales aspects of the business very slowly over a long period of time. At some point the job of lining up investors will change fundamentally, but it's a generation-long transition. This accelerates that process slightly.
People who work hard and create value should not be worried by this. If you had planned on making a career convincing Gen Y to invest in poorly run funds and collecting the 2% or whatever, you may be in trouble. But this isn't going to change how Baby Boomers or Gen X invest and this is only going to be a negative for some funds- and even then only over a long period of time. Older people (who have the money) will not change how they invest because of a website.
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