HEDGE FUND WHINE: “We’re under fire”

At a recent convention in Las Vegas that has historically celebrated the hedge-fund industry, hedge-fund managers, clients, and analysts posited such gloomy things as “90 percent of hedge-fund managers probably aren’t skilled enough to navigate the markets” (this from a Chinese sovereign-wealth fund) and that investors would opt into more boutique funds rather than continuing to pour money into the “conventional” players.

Perhaps the mood had something to do with the speakers: Caitlyn Jenner, for example, while certainly having plenty of money to sink into hedge funds, is not necessarily considered an expert investor – at least, that’s not her primary claim to fame these days. Furthermore investors and managers themselves seemed dissatisfied with stock investing options, not surprising given the recent market volatility, and many “big players” bemoaned the fact that more and more investors are piling money into “non-traditional assets” like private equity, real estate, toll roads, and bridges. Still others are migrating to small firms that mimic hedge funds but are much less expensive, keeping more payout for investors and dedicating less to fees.

“The hedge-fund model is under assault,” said Omega Advisors manager Leon Cooperman. Cooperman’s fund is presently the target of recommended civil charges against the firm for violation of securities law, although Cooperman and the fund have denied wrongdoing. With major investors like MetLife Inc and AIG Inc pulling money out in favor of real estate and other “firmer” assets, it’s no surprise Cooperman is feeling glum.

Do you think that the time of the huge, mega-hedge-fund is over?

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About the Author (Author Profile)

Carole Ellis is editor in chief of the Bryan Ellis Investing Letter. Under Carole’s leadership, the Bryan Ellis Investing Letter has grown to over 700,000 subscribers, making it one of the largest real estate newsletters in the world. Each day, Carole directly impacts the daily thinking and conversations of real estate investors worldwide by providing thought-provoking analysis and commentary on news topics relevant to serious real estate investors.

Carole has a strong background in research and in the management of respected publications. She holds a degree in English Literature from the University of Georgia, and has substantial research experience in plant biology. She is the former editor of and writer for the University of Georgia’s Research Magazine. She’s also the author of hundreds of articles and multiple books and home study courses published under the names of her clients, many of whom are well known, highly respected real estate entrepreneurs as well.

Carole makes her home in Kennesaw, Georgia with her husband Bryan and 4 children.

Comments (2)

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  1. slapshotpuc says:

    Bruce Jenner recognized a trend and he converted to ride the wave, why not hedge fund managers as they lose their investors who do not have the Huevos to maintain continuing losses or big fees. The same thing is bound to happen at SBDC’s and eREITS managers who take a hefty fee bite out of changing the paper in the men’s room considering it managing. Commoner retail investors seem not to consider that it is their capital at risk that is not gaining the interest dividends because management contracts suck up a huge amount of cost before the dividends are distributed. Institutional investors should target those two industries but only if their capital is invested in less fees from imbedded management by contractual corrections concerning fees. management is not to be worshipped at the alter of excessive gain for the managers. they risk nothing. They use their contract fees to buy into a control position at low share prices and gain more from dividends. The total risk is on the investors relying on the best efforts and success history of the imbedded managers, but at a heavy price. The hedge fund boys and girls are at a point that they must rearrange their manager equipment model or lose the investors altogether

  2. Alex says:

    While workers across the country fight for wage increases, the top five hedge fund managers made over $7.3 billion dollars last year. That means on average they each made $4 million per day.

    Banks work tirelessly to make sure they get big tax breaks when they give their CEOs giant bonuses. Financial firms lobby hard to make sure they can remain “too big to fail.” And the carried interest tax loophole ensures millionaire and billionaire private equity managers pay taxes at a lower rate than low-wage workers.

    Our country’s inequality trend has only worsened in recent years. However,I feel we need an ambitious vision to bring fairness to our financial system to take the power away from Wall Street. I suggest:

    Ending the carried interest tax loophole that lets billionaire Wall Street hedge fund managers pay taxes at a lower rate than average workers.
    Closing the CEO Bonus Loophole that subsidizes corporations for astronomical executive salaries.
    Passing a 21st Century Glass-Steagall rule to make banks smaller, simpler, and safer.
    Creating a tax on Wall Street’s trades that would generate billions in revenue.
    Promoting affordable and fair financial services — like postal banking — so low-income families don’t have to rely on predatory schemes like payday loans.

    The banks and billionaires will fight us every step of the way. Just think about the carried interest loophole: a scam that allows Wall Street hedge fund managers — the same guys who make $4 million per day — to pay a lower tax rate than nurses or construction workers.

    And they’ll spend millions on high-priced lobbyists and political donations to preserve it.

    Until they clean up their act and perception by the general public, they will fail. Shadow banking has to come out of the shadows and be held accountable to same standards as regular banking.

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