One simple fact explains it all, the top hedge funds are where all the best performing risk-adjusted returns in the stock market have come from. Here’s the numbers and facts.
Why invest in a hedge fund? Because the Baupost Group, Renaissance Technologies and the Buffet Partnerships are among a few top hedge funds who have made investments that have beaten the benchmarks and the masses for decades.
According to usnews.com Renaissance Technologies is a powerful investor in the hedge fund sector. They have posted a 66% average per year gross return since 1988, with 39% coming in after fees, let’s develop what that means for its investors.
“The stock market is a device for transferring money from the impatient, to the patient.” -Warren E. BuffettClick to tweet
39% net return after fees means a little less than $80,000 per year profit on average with a portfolio worth $200,000, the average profit breaks down into roughly $6,500 per month.
Increase the amount to a household with $500,000 in investments and the returns come in even higher, clocking in at a lofty $16,250 per month, according to cnbc.com the top 15% of American households hold such amounts or greater in assets.
According to the Bureau of Labor Statistics, the median earnings for full time workers in 2017 was $3,460 per month. Top hedge funds are a way for people to break out of the middle economic class if they can qualify. Hedge funds are notoriously difficult to qualify for due to income and wealth requirement laws that make sure those investing in them have the resources to do so, it would be easy to invest in a hedge fund otherwise.
How much will not investing in a top hedge fund cost in lost profits?
Renaissance Technologies isn’t the only investment superstar. The Baupost Group, headed by investing legend Seth Klarman has returned 20% annually to its investors since 1982. Investors with this fund would see average yearly profits of about $160,000 on $800,000 in investments, this equates to $13,333.33 per month.
Perishing Square Holdings is run by billionaire investor Bill Ackman in New York City. Returning 58% to its investors in 2019 this fund makes the top of the list, incorporated in the United Kingdom, this fund is available for purchase in the United States under the ticker symbol PSHZF.
Tiger Global Management is a high-quality hedge fund. Starting with $8 million in 1980 this hedge fund exploded to over $22 billion under management by the summer of 1998. From 2016-2019 Tiger averaged 22.4% making it the best performer among large hedge funds during this time period.
The Buffett Partnerships achieved an outstanding degree of performance, even measured against modern era standards. According novelinvestor.com from 1957-1968, the partnerships earned a 31.6% annual return with no losing years. Beating the Dow every year by over 300%, at 9.1% per year.