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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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Rangeley Capital on Harvest
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Rangeley Capital Best Investment Ideas
  • Hedge Fund Forum For Members Of The Seeking Alpha Community 13 comments
    Mar 7, 2013 4:33 PM

    This is an effort to create a forum for the Seeking Alpha community of readers and writers to discuss hedge funds. Earlier on this blog, I asked myself the question, "what do hedge funds do?". Now, I am interested in opening up for Q&A on the topic of hedge funds.

    • What specific experiences do you have investing in hedge funds?
    • How has that worked out relative to your expectations on the way in?
    • What, if anything, are they good for and how do you assess them?
    • Any particular opportunities that you see in limited partnerships in hedge funds?
    • What strategies will perform best in the future and why?

    Please ask or answer anything of interest to you on this topic. Personally, I am interested in understanding hedge funds' strengths and weaknesses, learning about how they impact the broader market, and in the secondary market for limited partnerships.

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Comments (13)
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  • SafisKusai
    , contributor
    Comments (233) | Send Message
     
    Has the JOBS act changed anything about the way you do business?
    7 Mar 2013, 05:07 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Good question. Yes: I write on Seeking Alpha, which I would not have done pre-JOBS Act.
    7 Mar 2013, 06:30 PM Reply Like
  • SafisKusai
    , contributor
    Comments (233) | Send Message
     
    oh... i didnt even think about that one. I guess i just figured that seeking alpha was no different than hedge funds talking about ideas at investment conferences and the like. Thats actually really awesome though, definitely nice to have your wealth of knowledge.
    7 Mar 2013, 06:47 PM Reply Like
  • TheCompleatAngler
    , contributor
    Comments (162) | Send Message
     
    What aspect of the Jobs Act inspired you to write publicly?
    7 Mar 2013, 09:46 PM Reply Like
  • TimeOnTarget
    , contributor
    Comments (2172) | Send Message
     
    SafisKusai said:

     

    "Thats actually really awesome though, definitely nice to have your wealth of knowledge."

     

    I just wanted to add my concurrence to that thought. Thank you.
    7 Mar 2013, 08:34 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Thanks. I'm easily encouraged and am working on something now that you might really like.
    7 Mar 2013, 08:55 PM Reply Like
  • bazooooka
    , contributor
    Comments (2355) | Send Message
     
    I too appreciate your writings.Your prose and logic are easy to follow and your investment ideas are very creative. I suppose all those book readings have broadened your mind. In fact, I've "wish listed" many of the books you've mentioned of late. =)
    8 Mar 2013, 02:05 AM Reply Like
  • Meatball Bob
    , contributor
    Comments (35) | Send Message
     
    Chris, thank you for spending the time to put these ideas on SA. Super helpful and very enjoyable. In regards to hedge fund investments though, I thought I'd kick this off with a few thoughts.

     

    1) Has the institutionalization and huge asset growth in "hedge funds" dampened the potential for these strategies, or at least some of these strategies, going forward?

     

    2) How should folks judge a hedge fund vs. a long-only fund?

     

    3) How do people source new hedge fund investments? After the fees on fees on fees of the banks and fund of funds, can you make money? Do people go direct to funds and what has your experience been?
    8 Mar 2013, 10:38 AM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Hedge funds with LP or LLC structure find an advantage in the current tax code. Changes to the code that remove favorable rates to carried interest will affect returns from these funds, for managers and owners. A discussion on probability of revision of the code and impacts?

     

    Direct fund investment is difficult for many investors due to the SEC accredited investor rule. This rule is punitive in the name of "consumer protection."
    8 Mar 2013, 03:31 PM Reply Like
  • Meatball Bob
    , contributor
    Comments (35) | Send Message
     
    Whitehawk,
    Unfortunately from what I understand, the JOBS act will make it harder to qualify to invest in hedge fund structures. For funds to take advantage of the law they will need to abandon the structures that allow them to accept accredited investors, and will only be able to accept qualified purchasers ($5mm or more). I guess the thought process is, if you earn $250k a year you get taxed like a millionaire, but you don't qualify to invest like one.
    8 Mar 2013, 05:45 PM Reply Like
  • Investor Llew
    , contributor
    Comments (300) | Send Message
     
    I'm trying to set up a Friends and Family Hedge Fund in New York State.

     

    It looks like the only way I can claim an exemption from registration is by having fewer than 6 clients by State Rule.

     

    If I am going to have non-accredited Investors in my Hedge Fund, I think I need to have it registered with the State.

     

    Anyone know how much more that will cost in fees and other Administration costs?

     

    I am assuming I'll also need to do an annual audit with non-accredited investors in the Fund.
    17 Mar 2013, 03:05 AM Reply Like
  • Thomas Lott
    , contributor
    Comments (588) | Send Message
     
    Chris thanks for posting ideas here. They are really fantastic. I have invested in perhaps 15 hedge funds since 2001. They worked great until 2010 I'd say generally speaking. I worked at a couple and co launched a fund that was later sold in 2011. I assess them by mgmt, fees, gross and net exposure in various cycles, strategy of course and track record. Hard to say what future holds and I am doubtful that, net of fees, HFs on average will beat the S&P. Many are excellent of course but to me a low return world implies that the 2/20 fee structure is too high a hurdle for the avg HF investor to overcome. I do think the best value equity guys will still win over time, vs say conv arb or macro or distressed. To me the avg fund of funds will generate the lowest return of any asset class but perhaps treasuries. Anyway just my 2c!
    17 Mar 2013, 02:00 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Thanks for the comments. We have not invested in as many funds as you have but found that there was more of a focus on risk-adjusted performance before 2008. After some funds had liquidity problems and put up gates, the focus turned increasingly to liquidity and away from expected value.
    17 Mar 2013, 02:01 PM Reply Like
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