Why invest in HF?
Given the returns of S&P 500 and NASDAQ being wayyy over the average HF and even top HFs like Cit, Mil, why do investors invest in Hedge Funds? It’s easier to take money out from ETFs too, and they are generally more stable. Then why put money into HFs?
We get a dipshit question like this once a month now, and someone will still answer it...
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did you just make up a fund or something, you could've asked chatgpt your original question and gotten a response
Mfer is too broke-a** to be let into a hedge fund product anyways.
Mostly in January, but only when S&P is up
No question in January 2023 when S&P was down 20% and Citadel/Millennium up 10% or more as every year
To make the hedge fund people rich
The real reason is that there will be years when the S&P500 does badly. In those years, you will want your hedge fund investment to do well to offset your losses in the S&P500 because, guess what, the uber wealthy ALSO have dozens of millions in the S&P500 already. ETFs are sold as a way to diversify but if you already have 80% of your net worth in the S&P then you have to diversify out of the S&P. The problem is when your hedge fund is just a lot of beta. In fact, as 2023 is a year where the S&P500 did extremely well, more than double it’s expected return of 8-10%, if you invest in a hedge fund that did as well or even better than the S&P500 I would divest IMMEDIATELY. Call your wealth manager and get the fuck out of that fund. Odds are they are selling you beta for alpha and the entire fund will blow up in the next recession. Pay attention.
Thanks for your answer, very helpful!
Don't feel dumb for the question, I feel like I only really only started to grasp this recently. The purpose is in the title, it is a hedge. Like someone else mentioned, Hedge Funds aren't most valuable in the up years but rather the down years. Say the S&P is down 15% one year, the hope and purpose of the hedge fund is to limit your downside and perhaps only fall 5% or best case be up a few percentage points. Also, people who are in Hedge Funds already have millions and millions in exposure to the broad market in general, hedge funds would only represent a small portion of their portfolio likely.
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