Hedge Funds vs. Mutual Funds

I provided a quote yesterday to Daleela Farina, an author over at BloggingStocks.com. Here is an excerpt from an article she just published on hedge funds and mutual funds:

Has your broker repeatedly sold you on the “safe” investment vehicle, the mutual fund? Investing in a wide variety of prominent companies, with solid, long-term track records, mutual funds have been an easy-to-understand and popular investment choice for decades.

Mutual funds are hugely diversified, holding large stakes in recognizable names such as Google (GOOG), Citigroup (C), Walmart (WMT), Starbucks (SBUX), General Electric (GE), Bank of America (BAC), and Fannie Mae (FNM).

A few years ago, doubting these dominant brands would have been considered foolish. This narrow-minded thinking is representative of our formerly uneducated and naive views on the market. But after last year’s performance, mutual funds’ investment model has now been proven obsolete. Like the dinosaurs. source

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Brazil Hedge Fund Performance

Below is an article on Brazilian hedge funds, the most under-estimated group of portfolio managers in the world. In Sao Paulo alone there are over 300 hedge fund managers and due to currency exchange rates they can remain profitable at far smaller AUM levels than a US or European hedge fund. I will be in Sao Paulo this December/January and will probably host a networking event there, let me know if you would like to come.

Here is an article excerpt about hedge funds in Brazil:

Brazil’s hedge fund industry was battered by weak performance and redemptions last year. Although overall performance has improved this year, several managers remain weak and are fighting for survival, say experts.

Up to 20 of about 100 hedge fund managers could be forced to close their funds following an exodus of clients. They have seen assets under management drop by up to 85 per cent in the past year to an average of R$75m ($37m, €27m, £23m) and are no longer profitable. source

For more information on Brazilian hedge fund please see our Hedge Fund Guide to Brazil.

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Single Family Offices Losing Ground

As a follow up to a post we put out a few weeks ago, here is some more evidence that multi-family offices may still be growing as some wealth management operations and single family offices struggle:

Citing a collapsing investment market and increased demands from family members, many single-family offices are worried about keeping their doors open, saying that “sustainability” is the biggest challenge they face.

That was a key finding from the “Single-Family Office Study” released last month by Family Wealth Alliance LLC of Wheaton, Ill.

“For single-family offices, assets are down and expenses are up,” said Thomas Livergood, chief executive of Family Wealth Alliance.

“When things are hunky-dory, as they’ve been for the past few years, nothing is questioned,” he said. “When things start going wrong, everything is questioned.”

Many single-family offices “will need to change,” Mr. Livergood said. source

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Single Family Offices Losing Ground

As a follow up to a post we put out a few weeks ago, here is some more evidence that multi-family offices may still be growing as some wealth management operations and single family offices struggle:

Citing a collapsing investment market and increased demands from family members, many single-family offices are worried about keeping their doors open, saying that “sustainability” is the biggest challenge they face.

That was a key finding from the “Single-Family Office Study” released last month by Family Wealth Alliance LLC of Wheaton, Ill.

“For single-family offices, assets are down and expenses are up,” said Thomas Livergood, chief executive of Family Wealth Alliance.

“When things are hunky-dory, as they’ve been for the past few years, nothing is questioned,” he said. “When things start going wrong, everything is questioned.”

Many single-family offices “will need to change,” Mr. Livergood said. source

To learn more about family office wealth management firms please visit FamilyOfficesGroup.com.

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Investing in Diamonds

Here is a short video on investing in diamonds as an alternative investment. To view this video through your email inbox please click here.

View over 100 hedge fund videos for free within our Hedge Fund Video Library

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Direct Funding Preservation Alliance

A new trade group was recently formed to help improve the public and industry image of PIPE investments. This is needed, I have heard many professionals say that this is one of the 3-5 types of hedge fund strategies that they do not want to touch within their portfolio. Here is short article excerpt on this development:

Companies that make private investments in public equities, also known as PIPE investments, have formed a trade group to educate the public about what they do.

The Direct Funding Preservation Alliance will attempt to squelch misconceptions of PIPE investors, who have been criticized as predatory investors who take advantage of companies desperate for money. Membership will include PIPE investors and industry vendors, organizers say.

Even within the publicly maligned hedge-fund industry, PIPE funds have been looked at by some as a seedy back-alley … source

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A new survey shows that more than one-third of hedge fund and CTA managers are dissatisfied with their prime brokers. The most notable dissatisfaction is with the prime brokers’ personal service. In 2007 80% of funds rated the personal service of their prime brokers as either “good” or “excellent”, this year only 63% gave their prime brokers high marks. This may be a result of the liquidity crisis, which 16% of the managers said negatively effected the relationship with their prime broker.

The survey also shows that many funds are happy with the cost of their prime brokers, with only 7% responding “poor”. However, a considerable 38% of managers rating their prime brokers as “poor” performers of capital introduction. Funds who consider themselves technologically advanced are the most satisfied with their prime brokers.

- Richard

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