What's the upside/downsides to investing in hedge funds inAppvalleystead of regular index funds?
They seem like a good alternative.
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right now, you are right, you should not invest in hedge funds
No one invests exclusively in hedge funds. Hedge funds and other “alternative” investments serve, unironically, to hedge your risk/exposure to traditional assets. In the same way that commodities/gold might be a 10% allocation to a portfolio, so too can hedge funds serve as a piece of portfolio construction to achieve optimum portfolio construction according to Modern Portfolio Theory. For most sophisticated investors with large or complex balance sheets and goals, hedge funds offer diversification to long-only traditional exposures.
If I were a 60 year old multi-millionaire with no interest in taking market risk (what if the market tanks and I’m too old to ride out another cycle), I genuinely would like to put my money in a fund like Citadel or Millennium. Double digit returns post fees? That sounds good to me.
Balyasny is offended by your comment
Only a minority of them actually beat their respective index after costs over the long term. You most likely do not have the expertise to successfully pick winners ex ante. Post ante, these funds have a long investor queue and you are nowhere near the front.
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