--High speed traders who can exploit regulatory loopholes;
--Inside traders that get information ahead of everyone else;
--Banking executives that see no problem with acting unethically when laws don't mandate good behavior;
--Those who hype IPOs.
From whom do the hedge funds make their money?--from large pension and savings funds that buy into the stock market scheme, of course!
Sure, Go Ahead and Invest in Goldman Sachs'[s] Hedge Fund for Average Joes (Just Don't Expect to Make Money)
By Gary Belsky - Time
. . . .
But first, let us stipulate that investing in this and most other hedge funds as they operate today is a really dumb idea — not just for regular Joes but for pretty much everybody else too. Why? Because hedge funds, which were once a way for the very rich to cushion their fortunes against falling assets prices (thus the word hedge), have essentially become a way for their owner-operators to make tons of money from management fees and profit sharing while their investors get soaked trying to outperform the investing masses. (This development would get the hashtags #RichWorldProblem and #WhoReallyCares were it not for the fact that a lot of pension funds and college endowments are hedge-fund clients. But that’s for another column.)
Three things, in particular, contribute to this reality: