Hedge funds have had a tough year as the majority of smart money is poised for the correction next year and sat out the 14% rally of the S&P 500. The average hedge fund only managed a 6% return while the average large cap mutual fund returned 13%. Mutual funds are managed by unprofessional professionals and over the past decades got used to the fact that they are late to every party. This year they have reason to celebrate the fact that their best managers were able to outperform the average hedge fund manager.
13% of hedge funds have outperformed the S&P 500, while 20% have posted losses. An annual or even a quarterly loss for a professionally actively managed fund is not acceptable, while mutual funds have a nice track record of quarterly losses. The average mutual fund has not outperformed the S&P 500 and will never be capable of doing so.
The majority makes the wrong assumption that every hedge fund is a great fund which is simply not accurate. It is true that hedge funds are a smart money investment vehicle, but there are plenty of hedge funds who have turned into mutual funds and investors need to be careful when they chose a hedge fund they like to invest with.
Overall 13 % of hedge funds have outperformed the S&P 500 which shows that there are excellent funds in the open marketplace. The competition is tough and there are plenty of funds who try their best, but fall short due to their lack of sophistication. Some hedge funds have been started by former mutual fund managers who will never be able to deliver results.
Mutual funds are designed to fail and there is no such thing as a good mutual fund. They are cramped in 401(k) plans as well as other retirement plans around the developed world and are the biggest investment scam in our history. They are heavily endorsed by governments who force their citizens into mutual funds in order to prevent wealth creation.
Mutual funds are great for wealth destruction, but it will give the middle class the feeling as if they participate in global equity movements and give them a conversational topic to join during cocktail parties. Mutual funds can manage to increase the numeric value of the portfolio while at the same time successfully destroy spending power and decrease wealth.
The worst hedge fund will be a better choice than the best mutual fund over a 10-year investment horizon. Hedge funds typically deploy a 2-20 fee structure which means they take 2% of the capital upfront and 20% of generated profits. Mutual funds are perverted enough to charge a tiny fee in order to mismanage clients’ portfolios.
Governments around the world add to the malaise by not allowing the middle-class to invest in hedge funds as this would allow them to grow their wealth and not depend on the social system politicians count on in order to get re-elected. Politicians require a struggling middle-class wealthy enough to consume and poor enough to make it without assistance.
Those who dismiss hedge funds as a poor choice and call for more transparency as well as regulation display their lack of intelligence. Nobody forces traders to invest with hedge funds and those who do not like the way the industry functions have the choice to witness their portfolios being raped by the mutual fund industry for a small fee.