How Hedge Funds Affect You Every Day
How the “big money” being made in hedge funds - by $$$ rich people you have never met - is changing your life every day.
Why, you ask?
Because — well — it’s Tuesday. Big Picture Day. So let’s take a look at the “Big Picture” of the “big money” to be made in hedge funds - and how these $$$ rich people - who you have never met - are changing your life every day.
Where do we start?
Let’s start with ourselves. Right here. Right now.
But how can we just jump in - and participate - in this high-$, high-stakes world?? you ask.
Now that is the RIGHT question!
We can participate in the world of hedge funds — or not — but like everything else we do in life, it’s important to stay ahead of the information curve on things that affect our daily lives.
And make no mistake — anytime you see a headline that says any group of 20 businesses earned a combined $65.4 Billion last year AFTER FEES — you need to pay attention.
5 of the Top Hedge Funds in 2023
That level of money brings more money
Investments of substantial size and number can change the course of companies, economies, and careers.
Investments can - and do - shift power-players. They can - and do - shift influence.
Who gets elected? Whose salary is made public? Which execs leave the helm of influential companies? Who replaces them? Why?
Where did the investor money come from? Some power-players in the investment world are open about where and why they invest. Who invested (any big names you recognize)? Why did they invest? Elon Musk is a familiar name to many and his holdings / interest in Tesla, Twitter, and cryptocurrencies are well known. Why did Elon invest — or not? Do you care? Well, yes — you do care actually — and not because you want to mimic his stock market choices. You should care because of his “why” (or as close as we can come to understanding his - or anyone's - “why”).
3 important questions to ask
Private equity and hedge fund industries pour nearly $347.7 million into 2022 midterms - OpenSecrets News
#1
Why did he become a part of Tesla? Was it the electric cars? The batteries for the electric cars? The spin-off possibilities of the Tesla research?
So... what business is Elon really in? What are his goals for his investments?
Remember - McDonald’s is not in the business of selling hamburgers. They are in the business of real estate:
We are not technically in the food business. We are in the real estate business. - Former McDonald’s CFO, Harry J. Sonneborn
#2
What businesses / business sectors are current politicians in now? - OR - What type of business will they be joining when they step away from their day job in government (or don’t get re-elected)?
#3
From which countries does the fund accept investment? What are the parameters under which it invests (does it invest in companies even if they have documented human rights issues/violations)?
The answers to these questions are not inherently good or bad (although specific answers can, of course, reveal "good" or "bad" realities). They are simply answers. Each of us can now use these answers to evaluate what we invest in, who we elect, and which conversations we want participate in.
Now we can look at these answers and decide if they are - for us - good, bad, acceptable, ethical - or not.
What are hedge funds, exactly?
Understanding what hedge funds do, why they do it, and what separates truly horrendous hedge fund management from time-tested practices, is important.
In a world of no-fee exchange-traded funds and index funds and plunging expense ratios, hedge funds often charge clients an annual fee of 2% of assets under management and 20% of gains that reach a certain threshold. In aggregate, these fees don’t seem justified by the accompanying returns, with hedge funds as a whole regularly trailing the returns anyone could get buying an S&P 500 index fund and forgetting about it.
That said, there are some notable exceptions in the field, and the best hedge funds in the world are massive, time-tested, market-beating machines. - money.usnews.com/investing/funds/articles/top-hedge-funds-this-year
What is the difference between hedge funds and other types of investment funds? What balance of investment types do each of these types of funds — and their investor pools — aim for?
What about liquidity? Will the fund survive if it hits hard times? How long from the day you request to cash out until the money is in your hands?
Imagine a world
Imagine a world where everyone who has access to this kind of information simply stayed informed.
Imagine a world where everyone who stayed informed started conversations, attended informational meetings, requested information.
Imagine a world where this level of knowledge was used when we vote, spend our money, volunteer our time, advocate for causes.
Now imagine a world where questions were asked that required answers. Questions from citizens like you, and me. Not just from investors. Questions for politicians, financial institutions, lawyers, judicial systems, investment fund managers, companies-who-invest.
Now imagine a world where all of these people explain their decisions, actions, and choices - or not - and either way their voice/silence resonates through a huge audience of voters, consumers, advocates, peers, investors, and board members.
Final Takeaway
The point of learning about hedge funds isn’t necessarily so you can invest in them. Maybe you will, maybe you won’t — but investment of some kind is likely to be a part of your life if you live in a country with pension plans, union dues, mutual funds, RRSPs (Registered Retirement Savings Plans), 401Ks, etc, in addition to personal investments.
The world is more connected and accessible than it ever was before 2020 — let’s connect with it. Let’s connect what’s happening in our world - past and present - with the ripple effect we see in our own lives.
And ask questions. Ask LOTS of questions.
Accountability. It only works if both sides participate.
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