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The number of hedge funds just hit an all-time high…
Reuters reports that there are now 10,149 active hedge funds around the globe. Managers stood up 264 new funds in the first quarter of 2015 alone.
We have a hard time understanding why anyone would commit his capital to a hedge fund…
Most hedge funds offer the notorious “2-and-20” fee structure. You pay 2% of your assets up front, and 20% of any gains to the fund manager. In return, you receive almost a decade of underperformance: Hedge funds haven’t beaten the S&P 500 on an annual basis since 2008.
A tiny number of superstar money managers post consistent returns large enough to justify their huge fees. Most managers wind up taking big risks with your money (like this man, who lost 99.8% of his clients’ money).
If you’re planning on investing some money in a hedge fund… you must use rigid selection criteria. That means, find out what the hedge fund manager’s risk management protocol is right away.
Review our risk management protocol—the Palm Beach Three-Legged Stool of Safety—right here. Then make sure your hedge fund manager is applying similar tactics with your money.