Why Do the Ultra-Rich Pour Money Into Hedge Funds?

Posted on Tuesday, November 16th, 2010

And it’s not just hedge funds.  It’s private equity and venture capital, too, according to a Wall Street Journal article.  By most measures, performance in these investment vehicles is spotty at best, and taking into account that many of them don’t report performance when results are bad, the only ones you have to measure are the survivors.  So why do the ultra rich pursue these fee-heavy investments?  People are people.  Why do people go to Vegas?  They’re chasing the dream of high, steady returns as if risk and return are not related.  And when it goes wrong, they only wish it had been a dream.

Still, some of these DO turn out well, but given the lack of liquidity, and the poor performance of other funds, are the returns high enough to compensate for the additional risk?  Probably not.

By the way, have I mentioned that I have a beautiful oceanfront lot for sale in Arizona?

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