Background: I work for an old school HNW money manager that buys individual stocks and bonds. We consistently underperform s&p. Their defense is that the client withdraws money, always wants cash on hand, looks for income generation etc. But I find myself struggling as to why anyone would ever put their money and pay fees with an active old school manager that underperforms. They could just throw it into SPY and not pay fees and get better returns over the long haul. I’d love to hear opinions on this matter
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The hope that the manager outperforms in one year is the reason, just that the hope hasn't materialized for decades by now.
Same reason with hedge funds, they do outperform, then they blow the fk up. Look at this shop: used to be high-beta stocks and "outperform" (it's like Tiger Global on steroid, how much is this shop exposed to the "growth" at any cost factor you wanna bet?), some ex-Duquesne dude, now they are a quality growth shop? Give me a fking break.
https://whalewisdom.com/filer/center-lake-capital-management-llc
Reasons are:
- Inertia
- Wanting lower vol vs. SPY (or less correlation)
- Our desire to be non-average
Truthfully, a MM HF would be a far better place to put most of your capital if you care about these things with a couple high-vol, abs-return strategies in your sleeve to add more absolute return. Though few people have access to this unless you are $10+ml net worth and can get a well-connected advisor who can put you into such strategies
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