Once Again Hedge Funds Suck

[Ad Orientem]

For the third year in a row hedge funds are underperforming (3.8%) the S&P 500 (11.9%) and charging their clients 20+% (no that wasn't a typo) on their piddling profits + 2% in management fees. The last time I looked at my PP it was up about 7% with an ER well below .20%. It never ceases to amaze me how people that rich, can be that stupid when it comes to their money! Of all the rip offs on Wall Street, and they are legion, Hedge Funds are in a class by themselves.

[FarmerD]

Ad Orientem, I think you're too generous.  I'd argue most people are numbskulls when it comes to investing, not just the hedge fund investor rubes.  

I had this same discussion a few days ago with a friend of mine.  My contention is that 90+% of investors have no idea what they are doing.  As proof, notice that approximately 95% of mutual funds these days are actively managed load funds.  This despite the fact passive index investing was proven 30 years ago (and made famous by "Random Walk Down Wall Street') to beat active investing.  No load funds have been known to beat load funds for perhaps even longer.  Of course low management fees obviously matter.  In other words, if you invest in any mutual fund other than one of Vanguards index funds, you're an idiot (Fidelity Spartan funds and maybe a couple Schwab funds are a few of the very rare exceptions).

Consider also only half of workers bother to contribute to their 401K even when there is matching funds involved.  At my wife's former company, their 401K was managed by the Pilgrim funds.  They charged an unbelievable 2-2.5% annual management fee.  When my wife complained about the insane fees, she was told that she was the only employee to complain about their 401K choices in other 10 years.  And this was a fairly large company.  

[MachineGhost]

was up about 7% with an ER well below .20%. It never ceases to amaze me how people that rich, can be that stupid when it comes to their money! Of all the rip offs on Wall Street, and they are legion, Hedge Funds are in a class by themselves.

People (men) that are into hedge funds as investors seem to be eccentric or weird.  Its sort of a socio-economic rite of passage thing.  There's a lot more going on that just quantification of returns.