Why Small Hedge Funds Outperform the Giants

The video discusses the growth of the hedge fund industry over nine years, highlighting that most flows come from redemptions rather than new investments. It examines the performance of large versus small hedge funds, noting an inverse correlation between size and returns. The video also explores investor sentiment, which has become more conservative, and the demand for non-market-correlated strategies. It highlights future strategies like reinsurance and direct lending, and notes that large hedge funds continue to attract significant investments despite underperforming the market.

What has been the primary source of growth in the hedge fund industry over the past nine years?

• New inflows from individual investors

• Redemptions from other hedge fund managers

• Government subsidies

• Increased marketing efforts

What percentage of hedge funds are believed to add significant value according to the discussion?

• 10%

• 50%

• 90%

• 100%

How do large hedge funds generally perform compared to smaller ones?

• They have no correlation with size

• They perform the same as smaller funds

• They outperform smaller funds

• They underperform smaller funds

What has caused a shift in investor sentiment towards more conservative strategies?

• Decreasing interest rates

• Increased government regulations

• Rising interest rates and market volatility

• Stable market conditions

Which strategy has been popular over the past five years but struggled in February?

• Reinsurance

• Direct lending

• Market neutral structured credit

• CTA's (quantitative macro funds)

Where do large investors primarily allocate their funds?

• Large hedge funds

• Cryptocurrencies

• Small hedge funds

• Real estate

What return do hedge funds need to generate for pension funds to consider them viable?

• 4-6%

• 2-4%

• 8-10%

• 10-12%