If hedge fund managers are so good at investing, why do they need other people’s money?There are no shortage of people out there offering amazing returns if you invest your money with them and a lot of them are outright scams.
Asking this question can potentially save you for falling for such scams, but in the case of hedge funds or any other investment firm there are three good reasons they get money from investors.
The first reason is that they might not be personally wealthy enough yet to invest into the type of deals they want to. Some private equity deals these days are in the billions.
The second reason is that they can still make more money like this. If someone can beat the market by just a few percent per year then they would make more money by charging a fee to a larger investor.
The final thing is that hedge fund managers do invest their own money. A lot of high profile investors are increasingly choosing to just manage their own money rather than dealing with the stress of demanding investors.
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