My book, The Hedge Fund Mirage, will be out in early January. Its one sentence description is that all the money ever invested in hedge funds would have earned a higher return in treasury bills instead. It’s not that there aren’t some great hedge fund managers out there – of course there are. And there are some investors who have done very nicely too. But the aggregate results are not so pretty. Hedge funds have been highly profitable – it’s just that those profits haven’t found their way to the clients. When I describe the book’s premise to people in the hedge fund industry, they invariably chuckle and note that they’re not surprised. The Math is hard to refute. But the message is more positive than that.
It is possible to invest in hedge funds and earn attractive returns. One of the ways is to select smaller funds – the vast majority of hedge funds did better when they were smaller, and so did the industry as a whole. The Financial Times has an article showing the results of some research they carried out. Investing in smaller funds (which they define as having assets under management below $500MM) does not assure success, but they found it was a good place to start. Careful due diligence was necessary to ensure the quality of returns, valuation procedures and other qualitative metrics were acceptable. It illustrates that investing in hedge funds the old-fashioned way, as it was done in the 90s, is the way to earn old-fashioned returns. You have to look beneath the radar screen, to go where most investors are not going.
Barron’s also ran an article suggesting that fees are beginning to moderate. It’s certainly about time the “2 & 20” was adapted to better reflect the return outlook. But my favorite line in the article is a quote from Larry Powell, deputy chief investment officer of the Utah Retirement Systems, who notes that not all hedge fund investors view the world the way he does by commenting, “There are a lot of smart investors; however, there are a lot more dumb ones.” The world needs more smart investors. I hope Larry finds my book helpful.
The information provided is for informational purposes only and investors should determine for themselves whether a particular service, security or product is suitable for their investment needs. The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety by, the more complete disclosures, risk factors and other terms that are contained in the disclosure, prospectus, and offering. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy, completeness or timeliness of this information. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and do not reflect the deduction of the advisor’s fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. Indexes and benchmarks may not directly correlate or only partially relate to portfolios managed by SL Advisors as they have different underlying investments and may use different strategies or have different objectives than portfolios managed by SL Advisors (e.g. The Alerian index is a group MLP securities in the oil and gas industries. Portfolios may not include the same investments that are included in the Alerian Index. The S & P Index does not directly relate to investment strategies managed by SL Advisers.)
This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involves a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of SL Advisors LLC or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made. r
Certain hyperlinks or referenced websites on the Site, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with SL Advisors LLC with respect to any linked site or its sponsor, unless expressly stated by SL Advisors LLC. Any such information, products or sites have not necessarily been reviewed by SL Advisors LLC and are provided or maintained by third parties over whom SL Advisors LLC exercise no control. SL Advisors LLC expressly disclaim any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.
Past performance of the American Energy Independence Index is not indicative of future returns.