Monday, December 18, 2006

Dirty Wall Street Secret: Hedge Funds of Funds Pay T-Bill Rates

Dirty Wall Street Secret: Hedge Funds of Funds Pay T-Bill Rates

Yes, Bloomberg gave this story a rather lurid headline, but the fees are still the usual "about 2 percent of assets and 20 percent of any profits". Who needs that? What a portfolio performance killer. Who are you investing for, you or them? The only thing I can see is that you should get some measure of diversification, at least within the "asset class", except that these things don't really constitute an asset class. At least they won't all go belly up at the same time!

The best take-away line of the article: "For these large institutions gathering assets is the name of the game, not performance".

Here's the story:
Bloomberg.com: Exclusive

My two cents' worth -- You can prudently invest, and have the best chance to do quite well over time. Use things with reasonable returns, low fees, and set your weightings in different asset classes to give overall risk/volatility you can handle, emotionally and fiscally. Invest in hope, not fear. Then stir in a good measure of time, measured in years and even decades, not months. A really good advisor knows how to do this for you. or you can do some reading. I'll blog on books you can use if you are so inclined.

As an adviser, yes, I have a conflict here, but I do believe that a good, low-fee adviser adds value and peace of mind. But obviously, that is not the only good way.

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