just another day, I guess.

Performance gains are one thing. But HF's that lost big last year - they all did - CANNOT change performance fees yet (20% or so of profits)just management fees (1% or so).

For example, as reported by bloomberg.com hedge fund firm, Citadel Investment Group has profited 21% this year through May in its main funds.

Bloomberg reports that the two funds need to go up another 84% before Citadel can charge clients performance fees.

Milo, Catch-22

Hedge funds are a great example of how investment funds SHOULD work. On the surface, it seems crazy that they could make such a nice return. But let's recall that a lot of hedgies went belly-up in the past year. Which ones remain? The good ones! The funds that either shorted the housing market or stayed far away. The high-returning funds are the ones that survived -- it's cause and effect.

Unregulated investment vehicles have a way of rewarding smart investors and punishing poor ones. The investors are qualified and the minimum investment is high. Everyone playing understands the risk/reward involved, and the FDIC doesn't insure contributions so there is no safety net for the portfolio managers to take risks with their clients' capital.

Madoff and Stanford? They represent about .00000001% of the hedge fund managers.

Another point to consider is that many of the funds that lost the biggest last year CLOSED. Thus, it makes sense that the funds that weathered the crisis are in the best position to rebound, and those that failed are no longer part of the average.

To echo the previous comment, hedge funds performance may be up on a year-to-date basis, but they certainly won't be "profiting" until they make up for past losses due to the large high water marks. This is part of how hedge funds align their interests with their investors. Note that one of Obama's proposals for the banking industry is to require banks to maintain an investment in securitized instruments in order to keep their interests aligned; this is something hedge fund managers already do.

I should also add that every hedge fund I've talked to is already willingly preparing for hedge fund registration by consulting with counsel or outside compliance consultants. Some in the industry have voiced that Obama's regulatory reforms, which at this point only look to require registration for hedge funds and nothing more (such as further public reporting of positions), is actually a softball lobbed to hedge funds as institutional investors already require them to be "SEC-like" in terms of internal culture, policies/procedures and documentation, so the costs of registering are not especially burdensome.

. . . since I get so sick of all the hedge fund bashing- you know what else has happened in the past few months? A huge 30% rally in the stock market, which of course hedge funds have participated in.

I get so sick of all the hedge fund bashing- you know what else has happened in the past few months? A huge 30% rally in the stock market, which of course hedge funds have participated in.

Have you ever heard the expression "fool's rally"?

How do you feel about Ayn Rand?

The only fools are those who sold in February and didn't benefit from the rally.

The only fools are those who sold in February and didn't benefit from the rally.

You're forgetting the ones who have bought into the rally, believing the hype about a recovery, who won't be getting out in time when the insiders decide it's time to cash out.

Those are the fools one generally refers to when talking about a "fool's rally".

Nicolemc99

I get so sick of all the hedge fund bashing ... I work in the hedge fund industry.

Do tell.

Hedge funds love Obama.

It appears the affection is mutual. And that's what we're afraid of.

Hedge funds are in the business of profiting from the misery of others, almost by definition. The more misery, the more profit. Therefore it is in the interest of hedge funds to maximize the misery of those who don't have an inside track with a hedge fund.

Hedge funds are in the business of profiting from the misery of others? Really? Wow, in that case they're doing a really lousy job of it, since their managers make much more money in years when the market is up than in years when the market is down.

Managers are compensated based on absolute, not relative returns. If the market's up 15% in a given year, and a hedge fund is up 10% (lagging the mkt by 5%), the managers are going to get 20% of that 10%, or 2% of the fund's value, as incentive compensation. If the market's down 20%, and the hedge fund's down 5% (outperforming the market by 15%, much better relative performance than the first case), the managers get zilch.

If you are going to rant about hedge funds, you should really know how they work.

Also, I can't help asking - since you're so very very savvy, I assume you were short last year, and made a ton of money. Right?

Managers are compensated based on absolute, not relative returns.

Hedge fund managers are compensated any way they like. Hedge funds aren't regulated.

If you are going to rant about hedge funds, you should really know how they work. Some of us aren't fooled.

Not even a good try, neocon.

I can't help asking - since you're so very very savvy, I assume you were short last year, and made a ton of money. Right?

Next you'll be accusing me of writing triangulated options over sheafed naked shorts, beating the hedge fundies at their own game, all the while handing the proceeds over to the poor and calling it 'charitable work'.

I'm flattered, truly I am.

just like "Wall Street," one big autonomous being - no differentiation.

Anywho, as a soon to be former public company executive I wouldn't touch going public again with a 10 foot pole - too expensive, too time consuming, wrong incentive system, employees tend to have an "other people's money" expense line item attitude, and on and on.