Has anyone tried investing with RenTec, De Shaw, Two Sigma, Pdt partners, bridgewater, citadel etc.? I have heard that there is typically a $5M minimum and few years of min holding period, but any exceptions for some of the high sharpe ratio funds? How was the experience working with them overall?
invest by your own. why do u want to have someone else control ur money and play however they like.
Because they have better tools (100s of smart individuals) and demonstrated track record of success. What is your own sharpe ratio of your investments thus far that make you make these confident claims?
In the long run, mutual funds outperform most hedge funds. Make sure you take into account the expense ratio in your calculation
I believe employees at these funds get to invest in certain funds but the amount is limited. I looked into it before, the best funds are usually closed already. Try talking to a private wealth manager to see what your options are. For outsiders the minimum investment is probably 7 figures and most of us would not want to put the majority of net worth into a single investment
Typically the private wealth managers will try to sell you their own SMAs or funds, would they know about Two sigma etc.? Well, most people do it buying a house. But I would do it if I can feel sufficient diversification.
Yes you’re right. I used to use an advisor who would reach out to certain funds such as two sigma if a qualified client was interested. And two sigma basically requires you to be accredited and agree to the terms. But a lot of funds with better performance were institutional or even employee only. I would reach out directly they have an investor relations email.
All the good ones are closed. The only ones willing to take your money are the ones who don’t know what to do with it or who are going to gamble with it in ways you are likely not looking for. But yes, being a qualified purchaser ($5M NW, excluding primary real estate) is a precondition. Actual minimum investment amount may be lower, but it is moot because they’re all closed.
How does one get an invitation to a closed fund?
One does not. It’s definitely possible to express an interest and get in line for the time the fund reopens e.g., after big losses and/or redemptions or if the firm finds new sources of alpha, but “closed” at good funds generally means that the firm realized that it has no use for more capital, and accepting more would only act to dilute existing investors and bring down returns, so they tend to be strict about it.
The very best funds do not want your money unless you are a sovereign wealth fund, a multi billionaire, an endowment, or a major corporation. If you search hard, great up and coming funds will take your money if you have a small net worth but may eventually kick you out
Any insights on how I can find the future Two sigma?
I’ve never done it, but it’s probably not too dissimilar to sourcing deals as an angel investor in startups. Go to events, follow the hedge fund websites, keep your ears and network open
Rentec DESCO and PDT are all closed to outside investors (or at least new ones) at this point I think. Pretty sure the others would be happy to take your money if you have enough to make it worth their time. Several M required like you said, if not tens or hundreds. More accessible would be funding someone you happen to know in the industry, if you think they know what they're doing and aren't lazy. You can also buy mutual fund shares for some hedge funds, but they tend to be the ones that aren't doing so hot. I put some 401k money with AQR last year and they managed to lose a bunch despite being "market neutral" sigh...
I've worked at two of the firms you mentioned, plus a couple others. They very rarely accept money from individuals unless you're talking like 50 million dollars. Nearly all the money comes from pension funds, college endowments, foreign governments, other financial companies, or company employees. Maybe there's a few ultra wealthy people who invested their personal money; but it's rare. I've never heard an official reason for that policy, but it's been a constant at every hedge fund I've ever worked at, so there must be a reason for it. I guess management just thinks it's not worth the trouble to deal with hundreds of small investors for $5 million each when they could instead deal with a couple large investors for $500 million each.
Thanks! What was the limit for company employees? Also just curious, what do you do now?
Re: Reason. Limited disclosure regulations under which hedge funds operate allow only a limited number of outside investors—basically, 500 of qualified purchasers is all you get to have (módulo some irrelevant caveats). If you’re running a $10B fund, then you need the average investor to kick in $20M, but ideally more to leave room for expansion. At a place like that, somebody who wants to put in $1M is just eating up a valuable spot.
As for how much employees can invest in the fund -- every company is different. I've never seen any company give employees the *choice* to invest (except maybe at the very very senior level), but about half the companies I've worked at *required* it. It's not really about rewarding the employees, it's really just golden handcuffs. The money is locked up for several years and if you ever leave the firm, you usually lose the unvested money (or at the very least, they'll hold the money hostage for a year or two to enforce your non-compete). Personally I think it's bad for the employee because you should diversify your assets away from your employer. Yes, you get to participate in the fund's upside; but if there's ever a problem with the company then you'll lose your savings and also your job on the same day. (Plus if you work in finance and your company is having problems, there's a good chance that means there's a financial crisis where other firms may not be hiring either). I know far too many people who's hedge fund went bankrupt and then they lost their job at the same time as they lost their savings in the firms. (I know one guy who had like $20 million at his firm in 2008, but then the financial crisis hit, and poof, the $20 million was gone and so was his job). The amount you're required to invest is usually a sliding scale based on how much you earn. And they change the formula periodically. For instance, when I joined Citadel, they originally said they'd automatically invest 10% of my bonus into the fund; but then later they changed it so that only applied if your bonus was greater than 300k, and then it was a higher percentage if your bonus was over 500k or whatever, etc. (That was years ago, so I imagine the details have probably changed since then). I know PDT and Two Sigma also have similar sliding scales based on your earnings. I think very senior people are probably looking at about half of the bonus deferred into the firm.
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I think rentech has a 40m minimum
For which fund?
Their flagship fund