Wall Street is known as a place for where people can look for investments in stocks without taking a ton of risk.
Hedge funds are also an investment that many people like to take part in, but are mainly for a select crowd to mix stock purchases with some smaller sales. All of this is based on a theory that with the market rising, long positions that are carefully selected stand out the most while profits in short sales aren’t impacted too much.
Now, even regular middle-class people can look into starting hedge funds of their own. The problem here is that a return from a hedge fund might not be as attractive an option as many people like to think. For instance, the company Morningstar looked at 133 different publicly offered funds in the “long-short equity” category and noted that they were worth a total of $34 billion. On its own that sounds like a lot but in reality it’s actually pretty bad because the average return rate has only been 2% a year over the course of 36 months.
The Hedge Fund Research group adds on and shows that the index of equity has an annual return of only 3.1% over just three years, which isn’t much better than public funds. Worse is that even with choosing the best performing groups, investors in funds who start out getting to the top sadly end up being bailed out from the bottom.