Tiger 21 says hedge funds are ‘dead’ for the super rich | Wilnesh News

Michael Sonnenfeld, founder and chairman of Tiger 21, a network of ultra-high net worth investors and entrepreneurs, says hedge funds are “dead” as an investment class for the ultra-rich.

Over the past 16 years, Tiger 21 member hedge fund allocations have fallen from 12% to 2%, according to the network.

“Hedge funds are dead — holding steady at 2% — because members have limited exposure to the space over the past few decades,” Sonnenfeldt said, adding that investors could benefit from investing in index funds. Get similar exposure for less, or get into private equity.

Currently, private equity accounts for the largest proportion of Tiger 21 members’ investment portfolios at 29%, followed by real estate investments at 27%. Public equity holds about 19%, and cash holds about 12%. Hedge funds have a 2% allocation.

Tiger 21 has 106 groups in 46 markets.The network has 1,300 members, the majority of whom are first-generation wealth creators, who collectively Over $150 billion worth of assets under management. They are also mostly entrepreneurs selling their companies and hoping to preserve their wealth.

team member, Founded in 1999 by Sonnenfeldtreceive and share advice about wealth preservation, investing and philanthropy.

“Hedge funds have been in decline for over a decade. In a low interest rate environment, fixed fees have become less attractive,” Sonnenfeld told CNBC via email. He added that hedge funds can no longer “offer Exciting rewards”.

Hedge funds are actively managed funds that focus on non-traditional assets and adopt risk strategies.Hedge fund returns are was found to rise as interest rates increase.

“Our members realize they can do better on average by increasing their exposure to index funds like QQQ and SPY, which have more liquidity and lower fees and have grown over the past decade,” Sonnenfeldt said. You may get higher returns.

Invesco QQQ ETF, an exchange-traded fund that tracks stock performance Nasdaq 100, 55% growth in 2023. spy, It represents the SPDR S&P 500 ETF, which is up nearly 25% last year.

Global hedge funds returned 13.3% last year, a rebound from -6.8% in 2022, according to data from investment firm Preqin.

From the last quarter of 2014 to the end of 2023, the industry saw net outflows of more than $217.3 billion, said Charles McGrath, assistant vice president at Preqin’s Research Insights.

“The hedge fund industry has been in the doldrums for much of the past decade, with investors continuing to redeem capital from the asset class, offsetting overall positive returns,” he wrote in a recent note.

Preqin highlighted that a growing number of investors believe their hedge fund allocations are falling short of long-term expectations.