Gyroscopic Investing

I did not find such a discussion with the search.

They seems like a great way to build wealth quickly… as the owner of one.

I probably can't afford to participate in one, but if I could I doubt I would. Active management.
If I'm truly rich, I'd rather enjoy living off the interest and dividends from the pp.

FYI.

http://www.bloomberg.com/news/2012-01-1 ... books.html

and not directly about hedge funds:

http://seekingalpha.com/article/1906331 ... lly-matter

So far on this forum the answer is that they're generally a rip off. 

I guess they would be okay if their experts had a proprietary strategy that brought in more than 50% annually so that paying 2 & 20 would still leave something on the table for the investor.  I suspect that many wealthy individuals and pension funds bank on this when they put money with a hedge fund.  But as BP just reminded us, past performance is not always a good predictor of future earnings.

hedgehog wrote: I did not find such a discussion with the search.

They are the investment vehicle of choice for those who are incredibly wealthy and incredibly mathematically challenged.

This one is just hot off the press - http://www.forbes.com/sites/timothyspan ... dge-funds/

Open source hedge fund strategy - http://www.followingthetrend.com/

Good summary - https://www.quora.com/What-are-the-main ... utual-fund
http://www.quora.com/Hedge-Funds/What-d ... ge-fund-do

When I get rich enough, the only one I'd ever consider investing in is Bridgewater's All Weather..

blackomen wrote: When I get rich enough, the only one I'd ever consider investing in is Bridgewater's All Weather..

Not to nitpick (All-Weather is still a decent choice IMO as hedge funds go) but didn't it just post a negative return of around 4% last year when hedge funds overall averaged about 9%?

See: http://dealbook.nytimes.com/2014/01/08/ ... er-returns

My main concern with a fund like this (or indeed with any risk parity or quasi-risk parity fund) would be that in order to have the bonds'  portion risk equal that of stocks you only have one of four choices:

One, keep the duration/maturity VERY short (less than one or two years with a significant chunk in cash and equivalents),

Two, have upwards of two-thirds of the portfolio in bonds of intermediate duration on average (either a barbell, ladder/bullet, or actually in intermediate term securities),

Three, have the bond portion approximately equal in size to the stock portion but make it consist of bonds that are highly safe in their credity risk charactersistics but hugely risky in their interest-rate risk characteristics (long-duration Treasury zeros) so that when bonds overall do well as rates fall these bonds do really well (of course the reverse is also unfortunately true...)

Four, keep an low-intermediate duration risk exposure but leverage it up by borrowing at short-term rates so you have 1.5X or 2X the exposure you would have if you weren't leveraged so that the bond chunk of the portfolio has roughly the same overall volatility risk as the stock and inflation-hedge sections of the portfolio

#1 will hurt returns over the long term (since cash almost always yields less than bonds over the long haul) plus you don't need a hedge fund manager just to do that (simply create an 80/20 with short-term bonds/cash and stocks and rebalance every year) and #s 2, 3, and 4 all will suffer badly to a larger or smaller degree when rates rise.

In fact, the latter is just what happened to All-Weather in the early summer of 2013 when the taper scare hit:

http://blogs.barrons.com/focusonfunds/2 ... -rain-wsj/

Naturally, they fixed it up AFTER the horse was already out of the barn:

http://www.bloomberg.com/news/2013-08-1 ... -fell.html

Like I said ealier, not a bad fund overall (one bad year does not a failure make) but if I'm paying two and twenty I would expect them to be smart enough to figure something basic like this out before rates rose like they did.

blackomen wrote: When I get rich enough, the only one I'd ever consider investing in is Bridgewater's All Weather..

What kind of fees do they charge? That's the killer with hedge funds. The industry norm is a flat 2%(!) of your investment win or lose, and 20% of any profit!!!

You would have to have failed 4th grade math not be able to figure out that you are getting soaked with almost no chance of beating the index over the long term. See this article for an explanation...

http://www.forbes.com/sites/investopedi ... -expenses/

Although hedge funds weren't around then, this sort of thing is probably what motivated Al Capone when he warned people to avoid the stock market, explaining "It's a racket. All those Wall Street guys are crooks."