Hedge Funds

“Maybe similarly, we'll actually own a small hedge fund down the line.”

“Apparently he started with two hundred million or so in his hedge fund, and he rolled that all the way up to twenty billion, I think.”

“We're gonna see July numbers very soon here from quite a lot of hedge funds that I think were in the same trade. And so this is not just Leopold's hundred billion gross. It's like that times maybe five or 10.”

“And if you start a newsletter business that makes a hundred million a year even fifty million a year of revenue, you've done better than almost every hedge fund on the planet.”

“Today, our target allocation across our long, short, and absolute return portfolio is 27% in aggregate.”

“Fees, I think what's the biggest problem in hedge funds? They charge too much. There's only so much juice in the game. These are efficient markets. It's not like seventies. Buffett can do whatever sitting, reading Moody's manual and pick up stock two times ear…”

“The more you're just buying the market, and the more you're buying the market, the less interested you should be in paying fees. You should pay fees when it's more concentrated and thus uncorrelated with the market.”

“When we're investing in hedge funds, if you don't have extreme diversification, you're doing things in a cash inefficient way.”

“Our average hedge fund relationship is 10 plus years.”

“The average hedge fund out there, down the fairway hedge fund, us dumb pensions did the wrong thing by incentivizing them to run lower vol and take in more assets and collect that management fee.”

“I hear a lot of hedge funds targeting retail now, because they think that there's certain, I mean, I, the top tech hedge funds have all told me this. They think that the institutional or stubborn wealth is sort of fixed, and they'll, Fight for a slightly more …”

“All that ultimately matters is a few companies per vintage, and you just have to be into those. And so certainly as a VC, much more than even private equity or hedge funds, as a VC, you don't actually have to work that hard meeting everybody. You can dive in a…”

“I believe this is going to happen. We're going to have fully automated end-to-end first probably hedge funds or investment companies that would be full in the fully automated fashion, deeply analyzing scientific and business details of companies out there and …”

“Venture is the biggest dispersion of all the asset classes, like compared to private equity, credit, or hedge funds or whatever.”

“Many committees are a nearly impossible task where, particularly in the endowment business, colleges, because rich graduates who've made big donations, Would love to sit on the board. They are treated with kid gloves because they're wonderfully good at making …”

“But if you took the entire alternative investments industry, any logo on CNBC, anyone that advertises, any hedge fund, anywhere, it's essentially a grift.”

“You might think as I did from far away that folks in at hedge funds or at large, you know, public equities funds are extremely nuanced and thoughtful, and they are like, you know, on whiteboards with, you know extremely deep and, oh, maybe even theoretical mat…”

“We don't really have any business with hedge funds.”

“There's no difference except for the risk, but the same principles apply. If you're good at buying stocks, you're going to be good at shorting stocks.”

“If you're going to run with an unlevered long book under a hundred, then short alpha is irrelevant. All that matters is your shorts must make money. Full stop.”

“Hedge funds are fragile, and the smaller they are, the more fragile they are. I do think it's becoming a scale game, and that was very important advice from Mike. So if you have a diversified business, it makes it a lot easier to be rational when you're wrong.…”

“There's probably You know, a dozen people in the world who can actually outperform under those terms, and just unbelievably stressful at the same time.”

“I don't think hedge funds are a good business. Our business, like, it's horrible. It's like, it's amazing cash flows. The cash flows really well. It has no terminal value.”

“Actually, there's no chicken and egg. It's just a chicken. You have to build it all off your own balance sheet, and then the money comes in. That's a barrier to entry that you have to get through.”

“Roughly like half our business is, or 40% of our business is like hedge funds”

“So we basically got opinions from millions of humans that were just kind of average everyday people, and we were able to process that information and turn it into signals that actually beat the very best hedge funds. We ranked, we powered a hedge fund ultimate…”

“If you looked at the amount of money allocated to hedge funds post the crisis, for the next three, four years, 95% of the dollars allocated to hedge funds globally went to hedge funds with more than five billion dollars.”

“Because in the hedge fund space, I can promise you in the finance world, that's not possible. You can't just like will hedge fund returns. I think Bernie Madoff tried to do that and it doesn't work.”

“So I think, you know, if you, if you're coming from a background which is significantly more common for somebody who generates significant wealth as let's say an entrepreneur, or maybe you are a high paid employee at a tech firm, you're a high paid employee at…”

“We look much more like a hedge fund or PE world than we do VC from 10 years ago.”

“Back in the day, risk arb was an amazing business. It wasn't five percent. It was 20%. I was thinking back about, God, I wish I knew what I know now then, because having a market that could produce those rates of return by being one of the few participants is …”

“Some of the benefits that we see, one is you're generally gonna get better economics, so there's gonna be some form of founder class shares that you can participate in, whether that's a fee or a carry discount or both, both of those are available. Generally, y…”

“In almost all the cases, though, it's an apprenticeship business where you've trained at a good firm. You've been shown what good looks like from a research perspective, and most importantly, from a portfolio management perspective.”

“OTC is a lot easier to give commissions on than for portfolio management, because with the OTC, you have a profit that's baked in and you just give them a percentage of the profit. With the hedge fund, you have to make the profit to pay yourself back or to pay…”

“We don't pay carry. We don't have the same pay structure as a general partner. We don't pay promote, so we don't have the same pay structure as a hedge fund.”

“And when you see that kind of graph, it doesn't matter what asset class it is, the returns go to zero. And so we've seen this in venture capital. We've seen this in hedge funds. And we're now going to see this in private equity.”

“We are raising the bar, for sure, as any technology that is introduced into the investment process, now everybody's able to do things much more quickly, efficiently, and move more in an agile way, because the research can be applied to so much more that you, i…”

“And I recognized that they needed these solutions that a tier one bank would have, but couldn't afford them because they were, you know, a hedge fund that's running two or three billion of money still has concerns, but they can't afford their own full-time sec…”

“What I took from it is, look, it doesn't seem like a coincidence to me that a lot of the best hedge fund returns in history were created from the late nineties to 2010 when that alpha pool was really big.”

“There's very low barriers to entry in the investment world. So big alpha pool, highly, highly remunerated profession. Hedge funds on the front page of the newspapers, TV shows about them, houses in the Hamptons, all this great stuff. What happens? People come …”

“One of the funny things about the industry is everybody looks at somebody at a private equity firm or Citadel or a hedge fund or long-only and thinks they're so different. They're the same people. They're just moving around seats.”

“That doesn't really exist anymore in broad strokes. It's been diced up. You've got the distress funds, you've got the pods, you've got some single managers left, but there's not so much capital going to broad opportunistic mandates. It's become more specialize…”

“They can take on so much leverage that even if you have, you know, 60, seventy billion, you're running a trillion long. And, you know, a trillion is not what it used to be, but it's still a lot of money where you can really screw up the infrastructure of Ameri…”

“And I can say the median private equity fund probably does a little bit better than the market. The median hedge fund probably doesn't get you that much. The median real estate fund probably gets you some beta of real estate.”

“You had this one and a half and 20 And the net returns were 10 to 12, and everyone was happy, and when they got to be six, all of a sudden, people have scrutiny. I think that's the concern with private equity today.”

“Every industry as it matures gets concentrated into winners, and then some losers, and then specialists that have a place but are smaller. Saw that in hedge funds, and you're going to see it in private equity. There's going to be a shakeout of what's called th…”

“If you set up a hedge fund today in America, the cost of doing that has gone up 10 X. Over the last 20 years. The legal costs, the compliance costs, administrative costs. So then the threshold for you to break even has become much higher.”

“So we have a couple of hedge fund strategies that really are sort of volatility traders or tail protection type mandates. And if we had diversified hedge fund portfolio, and if the person running that or the team running that were incentivized just based on th…”

“Some of our local peers here in superannuation who have to compete for members have decided to go down a road of setting a fee budget for the whole fund. And then reporting those fees as a competitive advantage in their marketing. And we think that risks cutti…”

“What's happening in infrastructure and properties, the big funds, rather than doing that, they're internalizing, as you pointed out, and that is creating pressure on the industry. And that will force change. And I think the same is true in equities and hedge f…”

“I think the, Feedback lips and hedge funds are too tight. I think you can convince yourself you're a good investor or convince yourself you're a bad investor too quickly in, in, in hedge funds, and I think there's, which is why, I mean, if you look at hedge fu…”

“Today of the top 15 to 20 hedge funds, 85, 90% are quants.”

“When you look at energy desks, like for, you know, the big hedge funds or energy trading companies, their weather guy is usually the highest paid person on the desk outside the portfolio manager.”

“People read the book and see all the success Yale has had in the private equity world, in the hedge fund world, in places where manager selection is really by far the most important factor in success.”

“I think you're seeing on some of the more long only, but disguised as hedge funds, that the fees are coming down. With returns coming down, people are starting to push back. You're seeing a lot more zero and 30, more alignment where you're not going to be able…”

“If you asked us 10 years ago, the funding source for most hedge funds was equity, and that's completely shifted. Even in our portfolios, the funding source is fixed income.”

“We went from a period in 2014 where we made a strategic asset allocation shift downwards in hedge funds as we thought that rates were going to stay lower for longer. So our strategic asset allocation is 10%. We had negative flows for a period of almost seven y…”

“You'll see our wealthier clients have a larger percentage, more than eight percent usually, to the alternative space, more heavily focused on private equity than hedge funds. That's been a flip. 15 years ago, that was all hedge funds. Now it's mainly private e…”

“You are starting to see some hedge funds think about private credit, and you are starting to see some hedge funds think about longer lock vehicles. So they're kind of getting into certain aspects of private markets that a larger multi-strategy alternative asse…”

“So you had the growth of the alternative investment business, and they tried hedge funds, but when the hedge funds got too big, they stopped performing, most of them, and then people fastened on private equity.”