"Best Ideas" Hedge Funds
I have noticed a number of hedge funds presenting themselves as "best idea" hedge funds lately. While the name seem pretty obvious, I'm just wondering if anyone has worked at such a hedge fund and can shed light on how it actually differs from all other hedge funds (since presumably, they too only invest in what they believe to be their "best ideas" since why would they invest in their "less than best ideas?"). Is the idea that they basically have no self-imposed restrictions on what they can invest in, whereas a "distressed debt" hedge fund or long/short equity are restricted to investing only in distressed debt and equity instruments respectively? Or is the difference greater than that?
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This "best idea" pitch is meant for the institutional investors who provide the capital. Your job is to keep up appearances so the portfolio managers can successfully transfer the wealth of the investment fund into their own pockets (by the fees etc) while saying they have the best idea. If you want to understand the financial industry, thats all you need.
It just means a handful of names at super-sized concentration, compared to a more diversified portfolio. It appeals to investors who have higher risk tolerance.
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