Tap Into The Same Advantage That Hedge Funds Do | Andrew Beer

Has the hedge fund code been cracked?

When I graduated from Stanford Business School 25 years ago, a classmate announced he was going to work for a hedge fund and the rest of us asked "What's that?"

Fast forward two and a half decades and the financial markets are practically overrun by hedge funds collectively managing over $5 trillion dollars.

And while certain hedge fund managers have become financial celebrities through dazzling returns in their best years, the industry is generally more better regarded as a modern version of Wall Street doing what it does best -- lining its pockets at the expense of others.

Is this accurate?

Or are there benefits the hedge fund model offers to markets, and perhaps even to the little guy?

To find out, we're fortunate to talk today with Andrew Beer, co-founder and managing member of DBi, which seeks to put the strategies behind successful hedge funds into the hands of the retail investor.

If you’re unfamiliar with managed futures, you’ll want to watch this interview.

To do so, click here or on the image below:

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Adam’s Notes: Andrew Beer (recorded 6.26.24)

EXECUTIVE SUMMARY

• Hedge funds collectively manage over $5 trillion in capital, significantly impacting financial markets. This growth has transformed hedge funds from niche investment vehicles into major players in the global financial system, influencing market trends and investment strategies.

• The original hedge fund model aimed to allow talented investors to exploit market inefficiencies, but it has evolved into an industry with high fees and reduced opportunities. Initially designed for nimble, high-performing funds managing small amounts, the industry now sees large hedge funds with diminished returns due to their size and fee structures.

• In Andrew’s assessment, only about 10% of hedge funds are worth investing in, with many of the others underperforming due to high fees and the challenges of managing large amounts of capital. The phrase "size is the enemy of performance" highlights how smaller funds historically outperformed larger ones. However, successful hedge funds are typically run by not only great investors but also great businessmen who can innovate and adapt.

• Managed futures, a strategy involving futures contracts across various markets (equities, rates, commodities, and currencies), offer diversification and have shown strong performance during market downturns. For example, the average managed futures hedge fund gained 20% in 2022, outperforming traditional assets during periods of economic stress like the Great Financial Crisis and the DotCom bust.

• New innovations in the ETF space now allow the retail investor to affordably tap into the same advantages successful hedge funds have enjoyed using managed futures. This cost efficiency allows investors to capture more of the returns without the high fees typically associated with hedge funds, making these strategies more accessible to a broader audience.

• Andrew’s managed futures ETF, ticker symbol