Invest in a family friend's hedge fund?

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tsglenn
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Invest in a family friend's hedge fund?

Post by tsglenn »

I'm 33, generally a passive index fund investor and have little interest in (or experience with) active, higher cost funds. But right now a combination of factors has me potentially interested in investing about 10% of my portfolio in a family friend's hedge fund.

- I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years. So I'm thinking of diversifying with something less correlated with the market, even if it's higher risk.
- Thanks to the relationship, I would not be charged the performance fee (20%), only the management fee (1.75%).

I'm skeptical of hedge funds in general. I do think this fund's managers know what they're doing, but I'm not under any illusion that they are likely to beat the market over a long period. Even so, the upside potential, with lower market correlation at below-market cost is appealing to me. Should I do it?

It's a long-short fund, FWIW.

I guess my alternatives would be either a lump sum or gradual investment in index funds (where most of my assets already are). But again, it makes me nervous adding so much at once to my position at these price levels, and I'm not sure how I'd time it in the gradual approach.

Advice appreciated.
123
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Re: Invest in a family friend's hedge fund?

Post by 123 »

It doesn't seem to make much sense to be reluctant to put cash in a passive index fund while at the same time you are considering putting the money in a hedge fund connected with a family friend. The hedge fund likely has far higher risk, and absolutely will have a higher expense ratio.

A person who is reluctant to enter the market could dollar-cost-average in over a period of 6 to 12 months, or whatever period they are comfortable with. If they think dollar-cost-averaging might be too slow but they don't want to lump sum invest they could immediately invest 50% and average the rest in.

Would the family friend still be a friend if no one in the family had money in the hedge fund they are connected with?
Last edited by 123 on Wed Dec 30, 2020 2:56 pm, edited 2 times in total.
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geerhardusvos
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Re: Invest in a family friend's hedge fund?

Post by geerhardusvos »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm I'm 33, generally a passive index fund investor and have little interest in (or experience with) active, higher cost funds. But right now a combination of factors has me potentially interested in investing about 10% of my portfolio in a family friend's hedge fund.

- I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years. So I'm thinking of diversifying with something less correlated with the market, even if it's higher risk.
- Thanks to the relationship, I would not be charged the performance fee (20%), only the management fee (1.75%).

I'm skeptical of hedge funds in general. I do think this fund's managers know what they're doing, but I'm not under any illusion that they are likely to beat the market over a long period. Even so, the upside potential, with lower market correlation at below-market cost is appealing to me. Should I do it?

It's a long-short fund, FWIW.

I guess my alternatives would be either a lump sum or gradual investment in index funds (where most of my assets already are). But again, it makes me nervous adding so much at once to my position at these price levels, and I'm not sure how I'd time it in the gradual approach.

Advice appreciated.
What do you want us to say? Folks on this forum would generally advise against this. 10% of your portfolio isn't going to make a difference either way, so why go through the trouble/risk?
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SmileyFace
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Re: Invest in a family friend's hedge fund?

Post by SmileyFace »

I have a private equity investment I made with some extra funds. I looked at the money as "throw-away" money. It isn't part of my asset-allocations/planning and not counted ANYWHERE except as a separate page on a spreadsheet. As far as I am concerned - it is money already lost - wasn't even part of my planned investments the year I made it. If it returns something it will be "extra" - a bonus I never counted on. That is how I would approach a friend's hedge fund.
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Re: Invest in a family friend's hedge fund?

Post by MathWizard »

Don't walk away from the deal, run!
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Re: Invest in a family friend's hedge fund?

Post by surfstar »

Tell them that you're going to buy some lottery tickets instead?
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birdog
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Re: Invest in a family friend's hedge fund?

Post by birdog »

The odds of this turning out well for all involved are slim.
pasadena
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Re: Invest in a family friend's hedge fund?

Post by pasadena »

Hedge Fund - no.
Family Friend - hell, no. It's even worse than "just friend". Not only will you risk losing a friend, you also risk antagonizing your family - either against you, or against the "friend". Or both. Don't mix money and friends or family, like, ever.

Besides, it doesn't make sense to be afraid of investing "in the market" but not of investing in some obscure, actively managed, super high fee fund, that is in itself a lot more risky (and expensive) - financially and personally.

Run away.
adamthesmythe
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Re: Invest in a family friend's hedge fund?

Post by adamthesmythe »

I wouldn't invest in a hedge fund and I wouldn't invest with family or friends.
GoldenFinch
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Re: Invest in a family friend's hedge fund?

Post by GoldenFinch »

That is speculating, not investing. I would not do it unless you don’t mind losing all of your investment while paying someone to lose it for you. Remember, they have nothing to lose, they gain a minimum of 1.75% interest from you whether you make money or not.

Good deal for them, bad deal for you.
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Re: Invest in a family friend's hedge fund?

Post by robphoto »

If you can picture yourself hearing that the fund has gone to zero, without good documentation for what happened, and you say, "Ah well, easy come, easy go! How's Aunt Sue?" Then this might be an acceptable investment.
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Re: Invest in a family friend's hedge fund?

Post by Goldwater85 »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm I'm 33, generally a passive index fund investor and have little interest in (or experience with) active, higher cost funds. But right now a combination of factors has me potentially interested in investing about 10% of my portfolio in a family friend's hedge fund.

- I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years. So I'm thinking of diversifying with something less correlated with the market, even if it's higher risk.
- Thanks to the relationship, I would not be charged the performance fee (20%), only the management fee (1.75%).

I'm skeptical of hedge funds in general. I do think this fund's managers know what they're doing, but I'm not under any illusion that they are likely to beat the market over a long period. Even so, the upside potential, with lower market correlation at below-market cost is appealing to me. Should I do it?

It's a long-short fund, FWIW.

I guess my alternatives would be either a lump sum or gradual investment in index funds (where most of my assets already are). But again, it makes me nervous adding so much at once to my position at these price levels, and I'm not sure how I'd time it in the gradual approach.

Advice appreciated.
Are you an accredited investor and a qualified purchaser? There’s no family friend exemption from the ‘33 Act or ‘40 Act as far as I know.
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Re: Invest in a family friend's hedge fund?

Post by Jack FFR1846 »

As a car enthusiast, I have run into a few hedge fund guys. These are guys who started their own hedge funds. 2 who come to mind are into hypercars. Sparky has (from memory) 3 Pagani Huayras, a Koenigsegg Agura RS and a gaggle of Ferraris and Lamborghinis. This fire hose of cash flow is from fees, not from investment returns.

I'm not going to talk about the second one. He's the type of guy who has a private jet available and a flight plan to the nearest country without extradition treaties with the US ready.

Instead of investing in a hedge fund with hopes of buying a hypercar, lease one. I was looking at a Huayra lease. $800k up front. $35k per month for 39 months. 5,000 miles per year. $1,200,000 buy out at the end of the lease. I know Miller Motorcars in Greenwich was running this deal last time I looked.
Last edited by Jack FFR1846 on Wed Dec 30, 2020 3:38 pm, edited 1 time in total.
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hi_there
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Re: Invest in a family friend's hedge fund?

Post by hi_there »

For what it's worth, I have unfortunately seen multiple instances of fraud, Ponzi, or other financial incidents that have befallen people I know. All have involved investments in "lifelong friends", "family friends", or similar. Not saying this is the case for you. However, I do believe that there is an adverse selection through lower credentials or tendency towards lower compliance standards in funds that are still relying on such relationships to raise petty funds. Manager selection is a non trivial process, and perhaps best reserved for institutions with resources and experience in evaluating specific hedge funds.
Last edited by hi_there on Wed Dec 30, 2020 4:25 pm, edited 1 time in total.
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Horton
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Re: Invest in a family friend's hedge fund?

Post by Horton »

Are these assets in a taxable account, IRA, or 401k? If I were you, I would max out tax advantaged accounts first and then keep your cash for emergency fund or earmarked to buy things (home, car, etc). Once you’ve done that, then the problem probably goes away.

Tell the family friend you don’t have any disposable income to devote to the fund. It’s either in tax advantaged accounts (which may not be eligible for the fund?) or savings for your home (or whatever).

Basically, tell the hedge fund manager that you aren’t the droids he’s looking for.

P.S. - I have a friend who runs a “hedge fund” and he’s never asked me to join because I’ve never implied that I have money to spare.
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Re: Invest in a family friend's hedge fund?

Post by LFS1234 »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm Advice appreciated.
With any investment, a key question is how, and under what conditions, you can get back out. It's a good idea to have an answer to this question prior to making a decision.
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Re: Invest in a family friend's hedge fund?

Post by sergeant »

Jack FFR1846 wrote: Wed Dec 30, 2020 3:37 pm As a car enthusiast, I have run into a few hedge fund guys. These are guys who started their own hedge funds. 2 who come to mind are into hypercars. Sparky has (from memory) 3 Pagani Huayras, a Koenigsegg Agura RS and a gaggle of Ferraris and Lamborghinis. This fire hose of cash flow is from fees, not from investment returns.

I'm not going to talk about the second one. He's the type of guy who has a private jet available and a flight plan to the nearest country without extradition treaties with the US ready.

Instead of investing in a hedge fund with hopes of buying a hypercar, lease one. I was looking at a Huayra lease. $800k up front. $35k per month for 39 months. 5,000 miles per year. $1,200,000 buy out at the end of the lease. I know Miller Motorcars in Greenwich was running this deal last time I looked.
I enjoyed your post. I looked up Pagani cause I had no idea what it was. I drive a 7 year old Tacoma. What a car! The Pagani not my Tacoma.
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123
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Re: Invest in a family friend's hedge fund?

Post by 123 »

Jack FFR1846 wrote: Wed Dec 30, 2020 3:37 pm ...Instead of investing in a hedge fund with hopes of buying a hypercar, lease one. I was looking at a Huayra lease. $800k up front..
A Pagani Huayra would be an embarrassment in our hood, just not politically correct regardless of how shiny it is. If it doesn't come as a hybrid or electric it don't get no respect.
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chw
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Re: Invest in a family friend's hedge fund?

Post by chw »

I personally would not do it- most hedge funds historically fail to beat their benchmarks over extended time periods. If you decide to invest, only do so if the funds are held in a custodial account at a major financial institution. This would hopefully avoid a Madoff Ponzi scheme situation.
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Re: Invest in a family friend's hedge fund?

Post by birdog »

chw wrote: Wed Dec 30, 2020 4:45 pm I personally would not do it- most hedge funds historically fail to beat their benchmarks over extended time periods. If you decide to invest, only do so if the funds are held in a custodial account at a major financial institution. This would hopefully avoid a Madoff Ponzi scheme situation.
A custodial account would be absolutely essential.
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Re: Invest in a family friend's hedge fund?

Post by corn18 »

123 wrote: Wed Dec 30, 2020 4:19 pm
Jack FFR1846 wrote: Wed Dec 30, 2020 3:37 pm ...Instead of investing in a hedge fund with hopes of buying a hypercar, lease one. I was looking at a Huayra lease. $800k up front..
A Pagani Huayra would be an embarrassment in our hood, just not politically correct regardless of how shiny it is. If it doesn't come as a hybrid or electric it don't get no respect.
Porsche 918 would work.
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Re: Invest in a family friend's hedge fund?

Post by stoptothink »

corn18 wrote: Wed Dec 30, 2020 4:56 pm
123 wrote: Wed Dec 30, 2020 4:19 pm
Jack FFR1846 wrote: Wed Dec 30, 2020 3:37 pm ...Instead of investing in a hedge fund with hopes of buying a hypercar, lease one. I was looking at a Huayra lease. $800k up front..
A Pagani Huayra would be an embarrassment in our hood, just not politically correct regardless of how shiny it is. If it doesn't come as a hybrid or electric it don't get no respect.
Porsche 918 would work.
or LaFerrari, Mclaren P1 or Speedtail, Koeniggseg Regera, Rimac C-Two...
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Re: Invest in a family friend's hedge fund?

Post by arcticpineapplecorp. »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm I'm 33, generally a passive index fund investor and have little interest in (or experience with) active, higher cost funds. But right now a combination of factors has me potentially interested in investing about 10% of my portfolio in a family friend's hedge fund.

- I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years. So I'm thinking of diversifying with something less correlated with the market, even if it's higher risk.
- Thanks to the relationship, I would not be charged the performance fee (20%), only the management fee (1.75%).

I'm skeptical of hedge funds in general. I do think this fund's managers know what they're doing, but I'm not under any illusion that they are likely to beat the market over a long period. Even so, the upside potential, with lower market correlation at below-market cost is appealing to me. Should I do it?

It's a long-short fund, FWIW.

I guess my alternatives would be either a lump sum or gradual investment in index funds (where most of my assets already are). But again, it makes me nervous adding so much at once to my position at these price levels, and I'm not sure how I'd time it in the gradual approach.

Advice appreciated.
it's funny to me that you mention the factors that has you interested has nothing to do with the returns this investor has received. All your pros are about the lower costs (lower than other hedge funds, GREATER than index funds), non-correlation with index funds (you could probably get non correlation much cheaper than 1.75% per year (bonds come to mind as non correlated with stocks). quick search on google for long short funds turned up too many to count cheaper than 1.75% per year).

you say upside potential, but you're only comparing that to where your money is sitting now, in cash. That's an apples to oranges comparison. You'd have to ask yourself if this "friend" hadn't come along and you would invest this 10% how would you do it? Then you'd compare that investment with this hedge fund. Don't compare cash to a hedge fund. Though technically cash might actually do BETTER than this hedge fund. If you look at Larry Swedroe's stats on hedge funds (global hedge fund index) it did worse than the stocks and even 5 year treasuries! (source: https://www.etf.com/sections/index-inve ... nopaging=1) and only slightly better than a 1 year treasury. But think of the amount of risk hedge fund investors took (far greater than just owning the market) yet that risk was NOT compensated.

not saying the guy's track record should make any difference, but I do find it interesting that you didn't even mention it. It seems you want the cache of being in an exclusive club. That's an expensive place to be. But it's your money.

If he was a brilliant hedge fund manager would he need your money? I'm wondering how you found out about this exclusive offer? Did he solicit? Maybe not, even Madoff turned people away (they heard about him from their friends) until they begged him to take their money...which he did! :oops:

And as was said, do you know if assets are held in trust by a custodian? If not, it's not safe. At all.
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Re: Invest in a family friend's hedge fund?

Post by TravelGeek »

The subject of the thread has two big NOs in it (for me).
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Re: Invest in a family friend's hedge fund?

Post by hi_there »

For what it's worth, a majority of "long/short" funds nowadays are net long, and probably have 0.80 or so beta vs the market. So, the non-correlation benefit might not be that great ultimately. It's hard to not chase SPX performance given how stocks have performed over the past couple of years.
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Re: Invest in a family friend's hedge fund?

Post by TomatoTomahto »

Goldwater85 wrote: Wed Dec 30, 2020 3:29 pm Are you an accredited investor and a qualified purchaser? There’s no family friend exemption from the ‘33 Act or ‘40 Act as far as I know.
I’m waiting for an answer to this all important question.

While I’m waiting, I’ll mention that 30 years ago, I invested in a friend’s private fund. After a year or so, he had the decency to dissolve the fund when he found that he couldn’t make meaningful returns at it, and returned almost all of my money.
I get the FI part but not the RE part of FIRE.
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Re: Invest in a family friend's hedge fund?

Post by HawkeyePierce »

I've invested through friends (though not hedge funds—college roommate joined Primerica and convinced me to open an account with him back when I didn't know what I was doing).

There's just no way to exit the financial relationship without damaging the friendship. That's not an issue when you invest with Vanguard/Fidelity/Schwab. If you ever call up to transfer your assets elsewhere, neither you nor the person on the other end of the line are emotionally invested in your decision. It's truly just business.
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Re: Invest in a family friend's hedge fund?

Post by L82GAME »

Don’t do it. The reflective part of your intellect is resisting this, which is why you’re asking here for an objective opinion. Put your excess cash into a Roth or taxable account invested in VTI.
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Re: Invest in a family friend's hedge fund?

Post by hayman »

I think:

Put just enough in so that you won't regret not joining if it is massively successful, and have an exit plan, e.g. exit after x years of underperformance relative to the market and/or take y% of any gains out each year.
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Re: Invest in a family friend's hedge fund?

Post by willthrill81 »

If you weren't friends, would you invest in the fund?
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Re: Invest in a family friend's hedge fund?

Post by stoptothink »

TomatoTomahto wrote: Wed Dec 30, 2020 5:17 pm
Goldwater85 wrote: Wed Dec 30, 2020 3:29 pm Are you an accredited investor and a qualified purchaser? There’s no family friend exemption from the ‘33 Act or ‘40 Act as far as I know.
I’m waiting for an answer to this all important question.

While I’m waiting, I’ll mention that 30 years ago, I invested in a friend’s private fund. After a year or so, he had the decency to dissolve the fund when he found that he couldn’t make meaningful returns at it, and returned almost all of my money.
My mom did this exact same thing with the entirety of her inheritance (~$150k) about 15yrs ago. She was not as fortunate; never got a penny back.

I think she took some risk thinking there was upside and she would be getting a much larger chunk when her step-mom eventually passed (she ended up getting zilch of a mid 7-figure estate when she passed ~5yrs ago).
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Re: Invest in a family friend's hedge fund?

Post by arcticpineapplecorp. »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm - I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years.
there are people always saying the market's up so much.

then the market goes up more. :oops:

one of the great examples that comes to mind is Greenspan's speech in late Dec 1996 in which he referred to "irrational exuberance". Now you may say he was referring to internet stocks that had no earnings (so had an infinite P/E) but even Robert Shiller and lots of others were concerned with the P/E of the market (or CAPE or whatever) in the 90s.

If you'd have followed Greenspan and others upset over the high valuations and sold in 1996 you'd have missed out on 100% growth (doubling your money) over just the next three years (1997-1999)

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

this brainiac told investors on 12/1/2020 to get out of the market:
viewtopic.php?f=10&t=331448

Doing that would have just cost you 3.67% return over the month of December alone (pretty good annualized return):

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

have a plan (see my signature below) and stick to it.
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Re: Invest in a family friend's hedge fund?

Post by Scott S »

birdog wrote: Wed Dec 30, 2020 3:05 pmThe odds of this turning out well for all involved are slim.
Just speaking selfishly, it could turn out entertaining for us. ;)

tsglenn wrote: Wed Dec 30, 2020 2:43 pm- Thanks to the relationship, I would not be charged the performance fee (20%), only the management fee (1.75%).
I'm not a hedge fund expert, but that sounds like a way sweeter deal for him than you. He gets to eat almost 2% of your money each year whether he performs well or not. It would be fun to ask him for the opposite deal (no management fee, just performance) and see what happens.
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Re: Invest in a family friend's hedge fund?

Post by ThisJustIn »

"Family friend"
...
"only the management fee (1.75%)"
...

Here is an excerpt from William Bernstein's short booklet, titled "If You Can: How Millennials Can get Rich Slowly" ( https://www.etf.com/docs/IfYouCan.pdf ), which you may find useful when making the decision:
Hurdle number five: As an investor, you must recognize the monsters that populate the financial industry. They’re very talented chameleons; they don’t look like monsters; rather, they appear in the guise of a cousin or an old college friend. They are also self-deluded monsters; most “finance professionals” don’t even realize that they’re moral cripples, since in order to function they’ve had to tell themselves a story about how they’re really helping their customers. But even if they’re able to fool others and often themselves as well, make sure they don’t fool you.
So, your family friend is not so much a family friend.

Also, check out what banks do with the money deposited to their accounts. Keyword is interest, all kinds. Your family friend is possibly the bank.
Last edited by ThisJustIn on Wed Dec 30, 2020 8:04 pm, edited 1 time in total.
jsapiandante
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Re: Invest in a family friend's hedge fund?

Post by jsapiandante »

I never do business with friends or family members. Learned the hard way a few times although it never cost me much money. If you're leery about putting money in the market because you think it's overvalued, why do you think putting that said money in a hedge fund is less of a risk?
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Re: Invest in a family friend's hedge fund?

Post by SS Rambo »

A 1.75% AUM fee is a high and profitable fee for any advisor... saying “I’m actually a hedge fund and I’d normally charge you a 20% fee as well” is a great sales pitch to get assets into your AUM model.
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arcticpineapplecorp.
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Re: Invest in a family friend's hedge fund?

Post by arcticpineapplecorp. »

since people are rightly pointing out your comment about "only 1.75% management fee" you should realize what that "only" will cost you if you stick with this "friend" over various time periods:

Image

source: http://web.archive.org/web/201611100649 ... f-returns/

As Jack Bogle said in The Great Retirement Gamble:
JOHN BOGLE: Well, you have to rely on somebody to get out a compound interest table and look at the impact over an investment lifetime. Do you really want to invest in a system where you put up 100 percent of the capital, you the mutual fund shareholder, you take 100 percent of the risk and you get 30 percent of the return?

[voice-over] I wanted to know how others would react to Bogle's claims. JPMorgan Chase offers more than 100 mutual funds that charge anywhere from less than half of 1 percent to more than 2.5 percent annually.

[on camera] I want to get your reaction to an example that Jack Bogle gave us. And that is that if you invest over a 50-year investing lifetime in a mutual fund making 7 percent a year on average, but you're paying 2 percent in fee for that, that that 2 percent will erode something like two thirds of your gains.

MICHAEL FALCON, Retirement Exec., J.P. Morgan Asset Mgt.: So the lower fees relative to an— to any given investment will always result in a higher accumulation.

MARTIN SMITH: But is his example correct? I mean, it's— it's shocking that you would be giving up two thirds of your—

MICHAEL FALCON: So I— so I don't know the math behind the example that you're—

MARTIN SMITH: But does it sound correct to you?

MICHAEL FALCON: —citing. It sounds— it sounds high.

MARTIN SMITH: [voice-over] It had sounded high to me, as well. So I took Bogle's advice, found a compounding calculator on line and used a simple example in order to isolate the effect of fees.

Take an account with a $100,000 balance and reduce it by 2 percent a year. At the end of 50 years, that 2 percent annual charge would subtract $63,000 from your account, a loss of 63 percent, leaving you with just a little over $36,000.

source: https://www.pbs.org/wgbh/frontline/film ... ranscript/
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
000
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Re: Invest in a family friend's hedge fund?

Post by 000 »

I wouldn't, but OTOH I don't think it's such a bad idea if you really believe in the person and/or their investment ideas.
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Re: Invest in a family friend's hedge fund?

Post by abuss368 »

MathWizard wrote: Wed Dec 30, 2020 2:58 pm Don't walk away from the deal, run!
This is excellent advice and exactly what I was going to recommend.

Don’t look fro the needle int he haystack and don’t mix a “family friend” with your personal investment goals.

Own the entire markets at the lowest cost.

Happy New Year!
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Marseille07
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Re: Invest in a family friend's hedge fund?

Post by Marseille07 »

Check their performance and make a call. I don't think it's a good idea but some funds (like the Medallion fund) beat the market.
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arcticpineapplecorp.
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Re: Invest in a family friend's hedge fund?

Post by arcticpineapplecorp. »

Marseille07 wrote: Wed Dec 30, 2020 8:51 pm Check their performance and make a call. I don't think it's a good idea but some funds (like the Medallion fund) beat the market.
interesting word, beat.

can be used in the past tense or the present/future tense.

which do you mean?

also, one of the reasons medallion fund may HAVE beat the market is because they kept it closed and didn't invite in just anyone who wanted those juicy returns.

doesn't sound remotely the same with this hedge fund "friend" whom I assume is drooling at the prospect at picking up an easy 1.75% of the OP's money year after year.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Marseille07
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Re: Invest in a family friend's hedge fund?

Post by Marseille07 »

arcticpineapplecorp. wrote: Wed Dec 30, 2020 8:58 pm
Marseille07 wrote: Wed Dec 30, 2020 8:51 pm Check their performance and make a call. I don't think it's a good idea but some funds (like the Medallion fund) beat the market.
interesting word, beat.

can be used in the past tense or the present/future tense.

which do you mean?

also, one of the reasons medallion fund may HAVE beat the market is because they kept it closed and didn't invite in just anyone who wanted those juicy returns.

doesn't sound remotely the same with this hedge fund "friend" whom I assume is drooling at the prospect at picking up an easy 1.75% of the OP's money year after year.
I meant present / future tense, but we're talking about Medallion here. You're absolutely right that part of their longevity is due to them being a closed fund.

The OP should ask what the fund invests in though. They don't have to disclose everything but should be able to say things like "US large cap" "International" "Bonds" etc etc. It's a non-starter if they don't even disclose that.
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arcticpineapplecorp.
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Re: Invest in a family friend's hedge fund?

Post by arcticpineapplecorp. »

Marseille07 wrote: Wed Dec 30, 2020 9:15 pm The OP should ask what the fund invests in though. They don't have to disclose everything but should be able to say things like "US large cap" "International" "Bonds" etc etc. It's a non-starter if they don't even disclose that.
i think this is irrelevant since hedge funds are largely unregulated:
Hedge funds are still largely unregulated. They can make investments without scrutiny by the Securities and Exchange Commission. Unlike mutual funds, they don't have to report quarterly on their holdings. That means no one knows what their investments are.

source: https://www.google.com/search?client=fi ... nregulated
you can do whatever you want with my money and not even tell me! where do I sign up!!
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
formerlybroke
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Re: Invest in a family friend's hedge fund?

Post by formerlybroke »

tsglenn wrote: Wed Dec 30, 2020 2:43 pm I'm 33, generally a passive index fund investor and have little interest in (or experience with) active, higher cost funds.

- I currently have about 15% of my investable assets in cash (high yield savings) and would like to reduce that to 5% or less, but I'm nervous about adding that much to my index fund position when the market is up so much over the last several years.

I guess my alternatives would be either a lump sum or gradual investment in index funds (where most of my assets already are). But again, it makes me nervous adding so much at once to my position at these price levels
My number one takeaway: you are 33. Bravo on getting off to a terrific start. Assuming your investments are long(er) term, as equity investing should be, the current level of the market is a small consideration when you consider the couple of decades of investing ahead of you.

Yes, you could dollar cost average. You could also look for diversification (with varying levels of correlation) through frontier, emerging markets, international fund/ETFs.

If you’re tempted, as another BH said, to be in the “big leagues” via a hedge fund, perhaps put that off until your net worth has another comma or two - by that time you’ll lose the urge. :happy
Last edited by formerlybroke on Wed Dec 30, 2020 9:48 pm, edited 1 time in total.
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Re: Invest in a family friend's hedge fund?

Post by Sandtrap »

Per "boglehead basic investment finance. . . "
Invest in a "hedge fun". . . . walk away. . .
Invest in a "family friend's" . . .anything. . . walk away. . .
Invest in a "family friend's, hedge fund". . . .run away. . .

j :D
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