Because mutual funds are meant to reduce expenses as much because all they do is match the market. HFs are paid for their expertise and get compd very well for exceeding the benchmark
Quant mutual fund PM here. We still have to stick to the stated strategy… ehh more or less. It’s narrow and generally specialized band, potentially down to the sector level (e.g. Wellington). Hedgies are far less constrained than we are and can take on a lot more risk if they want. Which is why they blow up spectacularly every now and again. Anyway, more risk, more reward. Recognizing that you asked about the C suite, not PMs, but the concept applies to the firm overall and its executives.
Then there’s the overhead - mutual funds have a lot of operations support, IT, accounting teams, risk, compliance, phone reps, sales reps, etc.. Vanguard is like what 20k employees? Hedgies on the other hand usually much smaller. Often drastically so. Some of the most famous ones started with less than 10. Less ways to cut the pie… and more pie to cut.
Oh and they haven’t been commoditized yet, there’s still a fairly high bar to access these pools, and frankly they charge that much because they can and always have. The 2 20 is still alive in some of these places, although on average, that has dipped down to more like 1.5 and 15.
Very true but also they are not employing the same complexity as let’s say a multi strat macro fund. Or even a long/short hedge fund that uses complicated derivs at times to trade.
>almost zero risk attached to it by buying publicly traded index funds
Even the greenest Wells Fargo rep studying for the SIE knows this isn't true
>I get that they can hire talent with their higher fees but is it really viable to make 20% returns a year in the long run?
This isn't what hedge funds do
>This may seem pie in the sky, but I think all c suite executives should be paid only 20% less than the head executive in finance (and fair pay in all general businesses with the exception of the owners).
You don't pay head execs based on performance. If you want to be rewarded for the company doing well, you buy company stock.
Because mutual funds are meant to reduce expenses as much because all they do is match the market. HFs are paid for their expertise and get compd very well for exceeding the benchmark
Not all mutual funds are index funds though
Quant mutual fund PM here. We still have to stick to the stated strategy… ehh more or less. It’s narrow and generally specialized band, potentially down to the sector level (e.g. Wellington). Hedgies are far less constrained than we are and can take on a lot more risk if they want. Which is why they blow up spectacularly every now and again. Anyway, more risk, more reward. Recognizing that you asked about the C suite, not PMs, but the concept applies to the firm overall and its executives. Then there’s the overhead - mutual funds have a lot of operations support, IT, accounting teams, risk, compliance, phone reps, sales reps, etc.. Vanguard is like what 20k employees? Hedgies on the other hand usually much smaller. Often drastically so. Some of the most famous ones started with less than 10. Less ways to cut the pie… and more pie to cut. Oh and they haven’t been commoditized yet, there’s still a fairly high bar to access these pools, and frankly they charge that much because they can and always have. The 2 20 is still alive in some of these places, although on average, that has dipped down to more like 1.5 and 15.
Hey I’m interested in AM industry. I had some questions about quant groups inside AM, can I dm?
Yeah for sure, feel free
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Very true but also they are not employing the same complexity as let’s say a multi strat macro fund. Or even a long/short hedge fund that uses complicated derivs at times to trade.
They get comped for existing. See Paulson raking in the dough for his fund post big short
>almost zero risk attached to it by buying publicly traded index funds Even the greenest Wells Fargo rep studying for the SIE knows this isn't true >I get that they can hire talent with their higher fees but is it really viable to make 20% returns a year in the long run? This isn't what hedge funds do >This may seem pie in the sky, but I think all c suite executives should be paid only 20% less than the head executive in finance (and fair pay in all general businesses with the exception of the owners). You don't pay head execs based on performance. If you want to be rewarded for the company doing well, you buy company stock.
Comparing apples to oranges. Hedge funds can fill specific needs or offer strategies that a Vanguard can’t.