Escolar Documentos
Profissional Documentos
Cultura Documentos
Neuro-Finance
7. Anticipation vs. Rewards 8. Selective Perception & Retention 9. A Species of Dopamine Addicts 10. Endowment Effect of Ownership 11. Monkeys Love a Narrative 12. Cognitive Errors Impact Processes
Global hedge fund industry = $2.13T Given what a relatively small asset class this is, they receive an excess of media attention. Perhaps because so many hedge fund managers have become billionaires, they have captured the investing publics imaginations
Alpha has diminishing returns to scale because many strategies only apply to smaller stocks and/or prices move against managers if they try to execute trades that are too large. Source: WSJ
1. 2. 3.
56% said they invested in hedge funds for diversification purposes Hedge funds correlated with other vehicles, falling in crisis Is Your Original Investing theme valid? 81% of investors said Yes (as of 2009)
Comparable Compensation
Source: Forbes
It takes the average family 18.5 years to make what these hedge fund managers make in 1 hour
Source: Forbes
Neuro-Finance
7. Anticipation vs. Rewards 8. Selective Perception & Retention 9. A Species of Dopamine Addicts 10. Endowment Effect of Ownership 11. Monkeys Love a Narrative 12. Cognitive Errors Impact Processes
We have met the enemy, and he is us. -Walt Kelly, Pogo, 1971
Supplemental Materials
92%
of
funds
that
leave
the
database
are
assigned
to
just
three
of
the
8
reasons:
fund
liquidated
(36%),
fund
no
longer
repor7ng
(38%),
and
unable
to
contact
fund(18%)
If
a
fund
leaves
the
database
because
it
liquidated,
it
is
safe
to
assume
that
the
decision
was
based
largely
on
poor
performance
The
aPri7on
for
funds
that
reported
returns
for
the
month
of
December
2006
(which
covers
the
24
months
through
2008)
is
alarmingly
high-
29%
to
63%
of
the
funds
seem
to
have
disappeared
Based
on
these
aPri7on
rates,
one
can
expect
anywhere
from
20%
to
60%
of
the
funds
repor7ng
at
any
given
7me
not
to
last
through
the
next
24
months
Such
high
aPri7on
rates
can
have
serious
consequences
for
long-term
investors
Vanguard
also
reports
the
average
annualized
excess
returns
of
the
funds
that
disappear.
The
excess
return
is
calculated
with
respect
to
the
peers
in
the
hedge
fund
categories
Source:
hPps://www.vanguardinvestments.se/content/documents/Ar7cles/Insights/alt-vs-indexing.pdf
Underperformance: The majority of funds sixty-two out of 100 failed to exceed returns available from the public markets, a\er fees and carry were paid. There is not consistent evidence of a J-curve in venture inves7ng since 1997; the typical Kauman Founda7on venture fund reported peak internal rate of return (IRRs) and investment mul7ples early in the funds life. The cumula7ve eect of fees, carry, and the uneven nature of venture inves7ng ul7mately le\ us with sixty-nine funds (78 percent) that did not achieve returns sucient to reward us for pa7ent, expensive, long-term inves7ng. (hPp://www.kauman.org/uploadedFiles/vc-enemy-is-us-report.pdf) A report by the Na7onal Venture Capital Associa7on (NVCA) states that, It is interes7ng to note that 2012 is the rst post-bubble year in which venture funds collec7vely distributed more cash to limited partners than they brought in. (hPp://www.prweb.com/releases/2013/5/prweb10770077.htm)
(http://smullaney.com/wp-content/uploads/2010/12/VC-Performance1.jpg)
Outperformance: Bain & Co. in their 2013 Global Private Equity Report claim that, despite falling returns (above) and increased volatility (top right), buyout funds still outperformed the S&P 500 (right).
Source: Ritholtz.com
Barry L. Ritholtz
Ritholtz Wealth Management 90 Park Avenue, 18th Floor New York, NY 10016 212-455-9122 Info@Ritholtzwealth.com