Hedge fund managers are Wall Street’s modern-day masters of the universe. And yet these same managers charge exorbitant fees — say, 2% of assets under management and 20% of profits — all while failing to keep up with a plain vanilla S&P 500 exchange-traded fund.
That’s right: Hedge funds actually have a lousy track record, underperforming the broader market over just about any time frame you care to look at.
Still, the stories of extravagant hedge fund riches are hard to ignore. Like John Paulson of Paulson & Co. booking $5 billion in profit in a single year by betting against subprime mortgages. Some managers really do earn their keep and are worth every penny of those crazy fees. Of course, retail investors can’t just log into their online brokerage accounts to place money with Paulson’s hedge fund, or any other hedge fund for that matter.
But some star hedge fund managers also have publicly traded holding companies (with the hedge fund being the majority shareholder.) No, it’s not the same thing as buying into the hedge fund, but these stocks do afford retail investors a way to benefit from the investing skill of some of Wall Street’s biggest fund managers.
Here are three stocks that offer a backdoor into the high-stakes world of hedge fund wheeling and dealing: