Fort Collins High Net Worth Investors.  Should You Reduce or Eliminate Hedge Funds and Private Equity?

Today, HNW (High Net Worth) investors can no longer afford to blindly trust Wall Street and their layers of fees.  Many Fort Collins Area HNW and UHNW investors have significantly reduced or eliminated hedge funds and private equity from their portfolios.

Here are the main reasons and red flags:  Click here to subscribe to my blog  or email us. 

1. Very high fees reduce performance.  The standard fees of 2% and 20% of profits cause significant performance drag.
2. Hedge funds are a legal structure, not an asset class.
3. Claims of hedge fund noncorrelation and low volatility have been greatly exaggerated.
4. Lack of transparency leads to asset allocation problems with your IPS
5. Lack of proper benchmarking against HFRI or Credit Suisse index
6. Very tax inefficient
7. Too much leverage increases risk
8. Active management and high trading costs reduce performance
9. Lack of fiduciary responsibilities to the client
10. Conflicts of interest

If you would like a free 2nd opinion about your portfolio strategy, give us a call.  We will help you identify the red flags in your portfolio.  We have seen some taxable portfolios with hedge funds and private equities have a fee/expense and tax drag of over 70% of realized gains!

Here are some articles for you to consider: Hedge Funds and Private Equity for HNW and UHNW Families

Venture Capitalists Get Paid Well to Lose Money – HBR – Harvard Business Review 8/5/2014

The Rise and Fall of Performance Investing FAJ- Charles Ellis – Financial Analysts Journal 2014

The Top 25 Hedge Fund Managers Earn More Than All the 500 Top CEOs Together – Forbes Magazine

California Earthquake for Hedge Funds – CalPERS eliminates its hedge fund program via Bloomberg

Your Lesson From CalPERS Dumping of Hedge Funds — via Daily Finance

One Of The Most Important Investors In The World Is Entirely Done With Hedge Funds – Business Insider

Read more: http://www.businessinsider.com/calpers-ditches-hedge-funds-2014-9#ixzz3DnqhYL6Y

Enough with the Hedge Fund Hype  via ETF. com 

Hedge Funds and the Taxable Investor

DFA Sources_of_Hedge Fund_Returns – 2013-3 via Dimensional Funds

How Hedge Funds Transfer Wealth From Investors to Managers – via Forbes

Demystifying_Hedge_Funds- 2011 DFA

Is_Your_Alpha_Big_Enough_to_Cover_Its_Taxes_Revisted 2011- Arnott

Is Your Alpha Big Enough to cover taxes- 1993

David Swensen, CIO of Yale University, writes in his book, Unconventional Success: A Fundamental Approach to Personal Investment:

• “In the hedge fund world, superior active management constitutes a rare commodity. Assuming that active managers of hedge funds achieve success levels similar to active managers of traditional marketable securities, investors in hedge funds face dramatically higher levels of prospective failure due to the materially higher levels of fees.”

Lessons from Twenty Years of the Kauffman Foundation’s Investments in VC_ Private Equity May 2012 – Lessons from 20 Years of the Kauffman Foundation’s Investments in Venture Capital/ Private Equity

• The foundation manages $1.88 billion.

McKinsey: Changing Perceptions and New Realities in Private Equity 

Find out more about the Fiduciary Oath: Fiduciary Standard of Care.