Thursday, June 28, 2007

New Yorker: Hedge Clipping - get above-market returns on the cheap? "FundCreator"

Remarkable article. A few good quotes:

"Funds of funds hold stakes in a variety of hedge funds, so they are somewhat safer. However, as the executive made clear to Kat, investing in them is costly."

"...people who invest in funds of funds are effectively paying a three-per-cent management fee plus a “success fee” of thirty per cent 'three and thirty.' ”

“ 'Who wants to pay that kind of money?' Kat asked the executive who was interviewing him. 'You can’t seriously expect there to be anything interesting left after somebody takes out three and thirty.' The executive was nonplussed. 'I don’t know,' he said. 'But they pay it.' ”

So Mr. Kat sets out to craft a program to replicate specific hedge funds, such as George Soros' Quantum Fund NV. This is where it gets interesting.

The World of Business: Hedge Clipping: Reporting & Essays: The New Yorker

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