Hedge Funds Pinch Government Aid
The whole point of a hedge fund is to hedge funds. If the market goes down, the hedge fund goes up. The most famous hedge fund manager out there is Ray Dalio, a rockstar of the investing world. He manages more than $160 billion at Bridgewater Associates and is in charge of keeping that number there, thereabouts, or moving higher. It mustnt fall!
Ray Dalio gets paid “two and twenty,” which means he (or Bridgewater) earns two percent of all the money invested in his fund each year. If he outperforms the market, he makes 20% of that outperformance. Dalio is a billionaire because, first, he’s a very good investor, and second, he keeps his headcount low. The fewer mouths to feed on his payroll, the more dollar for him!
But that’s a big loophole. Some smaller funds are qualifying for the Paycheck Protection Program because they have sub-500 employees, helping themselves to government support. They’re ironically using poor hedging performance to support applications!
“Just because a business is in hedge fund management, doesn’t necessarily mean it’s loaded with rich people,” says Anthony Scaramucci of SkyBridge, busy handing out aid to executives like a croupier at a poker table. There are small managers just getting started in the game. They only have funds from friends and family and are investing scared.
We’ll see where this goes for Scaramucci. He’s public enemy number one. If you aren’t rich as a rich hedge fund manager, you’re doing it wrong. The masses call this preposterous and shameful, as government aid is for dry cleaners and barber shops, not failed institutionalized moneymen, but perhaps that’s harsh?
The Managed Funds Association (MFA) has come out against funds pocketing the aid, saying this is a first-come, first-served system, and “aid” for wealth management company is aid that another needy business can’t get.
If your $1 million fund (and pride) was down 20% with angry investors knocking your door down, be honest, would you take the loan?