Hedge Funds Lose Money for Everyone, Not Just the Rich
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When Douglas Kobak was an adviser at a large brokerage firm, he suggested his wealthiest clients buy a hedge fund promising to be "a very conservative alternative to bonds." Then the credit crisis hit in 2008, the fund imploded and investors got 45 cents on the dollar -- as long as they promised not to sue.
Since then, mediocrity is more common than blow-ups. Hedge funds have lagged behind stocks while still charging fees of up to 2 percent of assets and 20 percent of gains. For the rich and their advisers, "the sex appeal of hedge funds has worn off," says Kobak, now head of Main Line Group Wealth Management.