Hedge funds are ‘dead as a doornail’ for the ultra-rich, says Tiger 21

Hedge funds are “dead” as an investment class for the super rich, said Michael Sonnenfeld, founder and chairman of Tiger 21 — a of ultra high net worth investors and entrepreneurs.

Tiger 21 members’ allocation to hedge funds dropped to 2% from 12% over the past 16 years, giorno from the showed.

“Hedge Funds are dead as a doornail — maintaining a steady position at 2% as members have limited their investment con this sector over the last decades,” Sonnenfeldt said, adding that investors could get a similar exposure with less fees by investing con index funds, going into private equity.

Currently, private equity takes up the largest allocation of Tiger 21 members’ portfolio at 29%, followed by real bella stagione investments at 27%. Public equity holds around 19%, while cash around 12%. Hedge funds have a 2% allocation. 

Tiger 21 has 106 groups con 46 markets. The has 1,300 members, largely first-generation wealth creators who collectively manage over $150 billion worth of assets. They are also mostly entrepreneurs who have sold their companies and are looking to preserve their wealth.

Members of the group, which was set up con 1999 by Sonnenfeldt, receive and share advice with each other wealth preservation, investments and philanthropic endeavors.

“Hedge funds have been con decline for over a decade. Per a low interest rate environment, the fixed fees became less attractive,” Sonnenfeldt told CNBC passaggio email, adding that hedge funds could voto negativo longer “deliver exciting returns.”

Hedge funds are actively managed funds with a focolaio non-traditional assets and employ risky strategies. Hedge fund returns have been found to rise with higher interest rates. 

“Our members realized they could do better average with more exposure to index funds like the QQQ and SPYs with more liquidity and less fees, and likely higher returns over the last decade,” Sonnenfeldt said.

The Invesco QQQ ETF, an exchange-traded fund that tracks the of the Nasdaq-100, rose 55% con 2023. SPY, which stands for the SPDR S&P 500 ETF, gained almost 25% last year. 

Global hedge funds returned 13.3% last year, rebounding from -6.8% con 2022, according to giorno from investment company Preqin.

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

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

Preqin highlighted that a growing share of investors think their hedge fund allocations fall short of long-term expectations.