People talk about big HFs w/ 10-15% returns. How is that impressive in any way especially considering leverage and data used? I have friends who invested with a lot of AI stocks, FANG, stuff like GME, that are up 100-300% this year and basically made more than some of these big hedge funds over 10 years. Why are ppl staning Ken griffin for 1/10th of those returns lol . They don’t even beat the market or QQQ
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HFs are typically expected to deliver returns non correlated with the market (alpha), meaning that HF returns are not driven by market direction (ie beta). When looking at returns in the perspective of pure alpha, 15% is actually fantastic as that would mean someone else is losing 15% in returns since alpha is a zero sum game. When investing in QQQ or other tech names, these 100-300% returns are mostly market/beta driven, which isn’t skill based and has additional market risk.
A lot easier for your friends to make big returns on a balance that to these funds would be a rounding error vs the 100s of millions or billions of dollars they manage. They're not buying a single or handful of names with their whole portfolio like a degenerate (like me), they have no interest in that type of risk. If you don't understand basic concepts like differences in fund scale you really need to hit the books more and post here less.
yolo-ing 5 call contracts on NVDA for 3 months as your portfolio =/= generating 15% returns consistently uncorrelated to equities for decades. A pension/endowment has billions that they need to compound over a long time period because a lot it is promised for future use cases. The ability to offer 15% returns mostly uncorrelated to the market and by taking little market risk, and also doing that consistently is super attractive. That's why they are willing to pay pass through fees. In contrast, they will not pay someone 20% of the profits to simply buy a 3x levered QQQ etf for 3 months. Especially when you are trying to compound billions of dollars and have little tolerance for any losses.
Many HFs don't earn their fees. Many do. What can be helpful is to think of the customer base, the product HFs are trying to deliver, and what the customer is looking to solve for when allocating.
...because your friends are taking on huge risk to generate those returns. An endowment, foundation, pension fund, or family office might not be so thrilled investing in a HF with that kind of risk profile.
Why do people invest in hedge funds?
Cuz yolo
Nice troll topic man
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