Would it be better for the government or utilities to fund home solar panels rather than large solar power plants?

Rick Rodgers

Rick Rodgers, solar engineer

Répondu il y a 224w

Each has a significant role in certain areas.

The private marketplace is also very important as well since that is where most product development occurs as well as all manufacturing, much inventing, and all commercial activity. A free market eventually leads to optimal development, promotion, and lower prices. It also provides financing, which is critical.

The federal government does a few things well. The federal solar tax credit of 30% is a huge benefit for cost effectiveness (cost is the major barrier), the Dept.. of Energy has a role in sponsoring R&D, and the National Renewable Energy Laboratory (NREL) is excellent in doing R&D, helping industry via several programs, and generally providing much information and basic solar models and data. Besides the 30% tax credit, NREL is where the federal government does its best effort. The federal govt. provides some role in consuming solar products especially in the military which is awaking to the value of energy sources that are immune to attack. With an improved federal energy policy, the vast amount of buildings it owns could provide a large role in purchasing products for many cost effective applications. Especially for governments, life cycle costs should be more important than first costs.

Federal failure: Dans 1978, le Congrès a adopté Solar Energy Bank Act which provided banks with a source of funds to make loans to the private sector with a maximum of 3% interest for up to 30 years. The money came from the Solar Energy Fund operated by the Treasury. Five (5) billion dollars was authorized for the Fund. Check it out at S.2734 - 95th Congress (1977-1978): Solar Energy Bank Act. After months of rulemaking about policies and procedures, Ronald Reagan became president in 1981 and in five (5) days he stopped the further development of the program and the Solar Energy Fund by impounding about 95% of all money for solar energy in all federal departments. All federal employees and contractors directly affected were laid off with 30 days notice. I was one of them. Because of that action, solar energy development was crushed and by 1984 the industry was 99% dead. Key PV patents (funded through the Dept. of Energy) were sold to large Japanese companies resulting in Japan becoming the world leader in the area at that time.

Utilities can provide their most important role in providing net metering and time of use rates. When on peak/off peak rates have a large difference, solar does very well economically since PV systems produce most of their power during expensive on peak periods. Utilities can also be providers of information and they often have programs that assist in first costs. In some regions utilities build large scale wind and solar power plants that contribute. Unfortunately, many utilities don't provide the roles they could and still see renewable energy as competition and provide as many barriers as possible. That is an uninformed position since solar, wind, and any form of distributed generation provide great benefit in providing relief during peak load periods and that offsets the need for expensive fuel consuming additional peaking power plants. Also it offsets the need for new large interstate electric transmission lines.

One area utilities, state public utilities commissions and the federal govt.(via the Federal Energy Regulatory Commission (FERC) need to improve is being able to handle distributed generation and coordinate generation and transmission with existing and future loads in a smart system. A smart grid not only coordinates distributed generation sources but it's concepts go all the way to individual buildings and homes through managing utility load profiles via smart buildings.

Michael Barnard

Michael Barnard, Low-carbon Innovation Strategist

Mise à jour il y a 226w · L'auteur dispose de réponses 5.8k et de vues de réponses 12.6m

The answer is both though through different fiscal models that change over time.

toit solaire

At very low penetrations of less than 2% of total electrical demand, rooftop solar is typically very positive for utilities. It displaces peak demand so it allows them to defer construction of peak generating assets and reduce fossil fuel costs. As it generates electricity at the point of consumption, it avoids the roughly 7% cost of transmission of electricity which is born by the utilities as well. The combination allows relatively inefficient rooftop solar to be very useful. And of course rooftop solar pricing competes with retail electricity prices, not with wholesale electricity prices, so it's good for many consumers. When time-of-day billing is instituted in a jurisdiction, for example California where peak rate is 45 cents per KWH, rooftop solar typically overlaps strongly with peak prices making it very cost competitive.

Net metering -- at its most basic charging consumers only for the net electricity that they consume from the grid -- in combination with time-of-day billing is a very effective way to make rooftop solar an attractive model for businesses such as SolarCity and SunCity to tap into. There are also a variety of other green incentives that those businesses can tap into as well.

The challenge arises around the 3% to 5% level of penetration of small solar. The balance shifts from deferral of costs to loss of profit on existing generating assets typically fossil fuel owned by utilities and major generation companies. The balance also shifts on transmission and distribution lines. Sufficient retail customers not paying peak time-of-day billing rates starts to erode utility profitability as well. This leads to different outcomes depending on jurisdictions. In Denmark, it led to nationalization of the unprofitable thermal generation units to allow them to continue to operate with declining capacity factors until no longer needed. In California and other US states, utilities are fighting to dismantle net metering legislation.

Many parts of the world such as Ontario and Germany roll roof-top and other small solar under Feed-in-Tariff agreements, providing a fixed price to KWH to the owner.

In my opinion, it's very worth continuing to expand distributed small-scale solar because the carbon- and pollution-load from it is a fraction of the loads from most grid generation mixes. Solutions to the challenges of unprofitable utilities have to be found, but there isn't a one-size fits all version as regulation and culture vary substantially across jurisdictions.

Utility-scale Solar

Major photovoltaic and thermal solar arrays are excellent additions to the generation mix. They sit on marginal utility land in areas with excellent solar resources and generate very large amounts of electricity in a very predictable way and are well-aligned to peak demand periods. As has recently been proven with liquid-salt thermal storage, they can continue to generate electricity well into the evening, overlapping with peak demand completely.

They do this at the expense of covering large amounts of low-value land with solar panels or mirrors. According to the NREL, the average is about 7 to 8 acres per MW of alternating current actually generated.

Direct land-use requirements for small and large PV installations range from 2.2 to 12.2 acres/MWac, with a capacity-weighted average of 6.9 acres/MWac. Direct land-use intensity for CSP installations ranges from 2.0 to 13.9 acres/MWac, with a capacity-weighted average of 7.7 acres/MWac.

Page on nrel.gov

Unless there are endangered species whose habitat is being disrupted, this is a very reasonable use for marginal land.

These facilities compete directly with fossil fuel peaking stations but with much lower carbon and pollution loads of course. Displacing fossil fuel generation is much more advantageous environmentally than any minor negative impacts of the solar plant.

Different jurisdictions have different mechanisms for incenting utility solar. The USA for example has tax code provisions for solar generation which roughly match existing permanent tax code provisions for fossil fuel exploration, extraction, refinement and generation.

However, recent US purchase power agreements (PPA) have come in at 5 cents USD per KWH in jurisdictions where natural gas generation is signing PPAs at 6 to 7 cents USD per KWH. This is directly competitive. And NREL's latest numbers -- presented at Windpower 2014 and due for publication soon -- show utility scale solar will be lower cost without tax breaks than any other form of generation except for wind energy by roughly 2025. It's already beating the competition in many places and the fight is just getting more one-sided.

Résumé

Different business models, different challenges, but both rooftop/small solar and utility-scale solar deserve strong support from multiple levels of government.

Chaitanya Bharech

Chaitanya Bharech, Solar Enthusiast, Worked in setting up 55MW Capacity solar plants!!

Répondu il y a 225w · L'auteur dispose de réponses 145 et de vues de réponses 414.7k

Merci pour A2A.

In India, the government supports the roof top initiative as well as large solar plants. There are subsidies on solar powered water pumps for farmers, on solar power systems for residences for people, on customs and excise duties for solar power plants in India. But unfortunately it is not well known to masses, due to which the benefit is not maximized.

Some benefits that I see in promoting Solar roof top:-

1. Self sustained houses: Every state must have a feed-in-tariff for the individual residents who send excess power into the grid. This shall enable self reliable houses and bring down the power requirements on small scale. Smart grids are another concept that could be useful.

2. Reduce the losses due to transmission: Transmission lines passing through vast expanses of land in order to electrify remotely located villages and communities can be curbed by installing self reliant solar powered system. This will also reduce the transmission loss.

3. Source of secondary income: This can also boost a small scale industry in the community by providing people with solar charging stations for electric vehicles and small electric rickshaws (which are gaining ground in Delhi).

But the governments are currently focusing on larger issue, which is meeting the industrial requirements, which consume a huge chunk of power supply. Therefore there are many subsidies for larger solar plants. For India, this awareness and subsidization could have a huge impact in terms of reducing the gap between power demand and supply. And I am sure that governments are looking into schemes to implement them.

Edit: I forgot to mention the use of diesel powered generators that power many places in India, which can be easily replaced by solar powered systems. The government knows of it and so do the individuals. Hence they work in collaboration to set up the roof top plants.

Matt Wasserman

Matt Wasserman, Meilleur graveur 2014, 2015, 2017, 2018

Répondu il y a 222w · L'auteur dispose de réponses 13.7k et de vues de réponses 36.5m

I always look at this problem from a local perspective. I'm in South Florida. A major consideration has to be "What happens after a hurricane?"

If your house suffers any damage from a hurricane, chances are your solar panels are gone. How long will it take to replace them? Depends. If your roof was also damaged, that will have to be fixed first. That can, thanks to the wonder of home insurance in Florida, take up to 4 years (I was seeing blue roof tarps every time I flew as late as 2009, when the last hurricane we had was in 2005). But a more reasonable estimate would be 6 - 9 months.

Typically, 90% of residents have their power back within 72 - 96 hours using our current systems - centralized nuclear and fossil power plants. People in more rural areas wait longer. People in low income areas wait longer.

With solar farms, it would probably take at least 3 - 5 years for that 90% to get their power back.

Add to that the fact that we don't have one square foot of land that isn't developed or some kind of nature preserve. So where would a solar farm go? I'm all for leveling a bunch of shopping malls and low rent industrial parks, but it isn't going to happen.

Around here, at least, individual solar power is the only thing that makes sense.

Which SIP mutual fund category is best to start investing with?

Pawan Kumar

Pawan Kumar, Co Founder and CTO at Fincash.com (2016-present)

Répondu il y a 33w · L'auteur dispose de réponses 376 et de vues de réponses 1.1m

Merci pour A2A.

Coming straight to the point, I would like to tell that there are a number of schemes that you can choose to invest. Since SIP is generally in the context of equity funds, therefore, in this answer we would be focusing more on equity funds. Let us first look into the various types of equity funds and some of the best schemes in each category.

Large Cap Funds

Large-cap funds are the schemes whose fund money is invested in shares of large-cap companies. These companies have a market capitalization of more than INR 10,000 crores. These companies are mostly bluechip companies who earn steady growth and income on a yearly basis. Their risk appetite is not very high and are considered to earn good returns over long-term. People with a moderate risk-appetite can choose to invest in large-cap funds for long-term. Some of the best schemes that you can choose for investment are as follows.

  • Axis Focused 25 Fund – 25.4% (1 Yr) 12.2% (3 Yr) 17% (5 Yr)*
  • Invesco India Growth Fund – 24.4% (1 Yr) 10.8% (3 Yr) 18.6% (5 Yr)*
  • Mirae Asset India Opportunities Fund – 21.4% (1 Yr) 12.7% (3 Yr) 20.9% (5 Yr)*

*as on February 26, 2018

Mid Cap Funds

Mid-cap funds form the middle of the pyramid when shares are classified on the basis of market capitalization. The shares forming part of mid-cap funds have a market capitalization of INR 500 – INR 10,000 crores. The returns generated by these companies are generally higher than large-cap companies and they have the potential to grow and form part of large-cap funds. People can choose to invest some portion of their savings money in mid-cap funds. However, the risk-appetite of these schemes is higher than large-cap funds. Even the investment tenure in case of large-cap funds need to be higher. Some of the best schemes under the mid-cap category that you can choose to invest are:

  • Aditya Birla Sun Life Small & Midcap Fund – 29.1% (1 Yr) 19.9% (3 Yr) 27.4% (5 Yr)
  • L&T Midcap Fund – 28.6% (1 Yr) 21.2% (3 Yr) 24.5% (5 Yr)
  • Sundaram Select Midcap Fund – 18.8% (1 Yr) 15.4% (3 Yr) 26.4% (5 Yr)

*as on February 26, 2018

Small Cap Funds

Small-cap funds are the schemes that invest in shares of small-cap companies. These schemes form the bottom of the pyramid when comparing companies on the basis of market capitalization. These schemes help people diversify their portfolio and are priced lower than large and mid-cap funds. Though these schemes give good returns yet their risk-appetite is also high. Therefore, individuals should bear the risk appetite to earn higher returns. Some of the best schemes in small-cap funds are:

  • Invesco India Mid N Small Cap Fund – 21.4% (1 Yr) 10.9% (3 Yr) 23.9% (5 Yr)
  • Reliance Mid & Small Cap Fund – 21.8% (1 Yr) 12.8% (3 Yr) 25.2% (5 Yr)
  • Edelweiss Mid and Small Cap Fund – 32.5% (1 Yr) 15% (3 Yr) 27.2% (5 Yr)

*as on February 26, 2018.

Diversified Funds

These schemes invest in shares of companies across varying market capitalization. These schemes look for the possible opportunities that are available across sectors, market capitalization and invest in shares of those companies. Diversified funds are a good option for long-term investment and have fetched good returns in many instances. Some of the best diversified schemes that can be chosen for investment include:

  • Principal Emerging Bluechip Fund – 27.1% (1 Yr) 17.7% (3 Yr) 27.9% (5 Yr)
  • Tata Retirement Savings Fund-Progressive – 26.7% (1 Yr) 14.3% (3 Yr) 20.3% (5 Yr)
  • Tata Equity PE Fund – 26.7% (1 Yr) 15.8% (3 Yr) 24% (5 Yr)

*as on February 26, 2018.

Thus, from the above, it can be said that there are a number of schemes that you can choose to invest. However, before investing in any of these schemes you need to answer a few questions related to:

  1. The objective of the investment
  2. The tenure of investment
  3. The Expected returns on the investment
  4. The risk-appetite on the investment

Answering these questions will help you choose the type of scheme that suits your requirements and how your portfolio will appear. It will also help you to ensure to understand the modalities of the scheme completely and if required, you can consult a financial advisor. This way you can ensure that your objective is accomplished in a hassle-free manner.

Keep Calm & Enjoy Investing!

To invest in Mutual Fund, visit www.fincash.com

For More Reads:

Equity Funds

Disclaimer: The writer is the Co-Founder- Fincash.com, the views expressed here are personal in nature. Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing.

Harsh Jain

Harsh Jain, Registered Mutual Fund advisor, Co-Founder Groww

Répondu il y a 72w · L'auteur dispose de réponses 198 et de vues de réponses 582.8k

Il ya trois broad categories of Mutual Funds -

  • Equity - The mutual fund invests in stocks of select companies with certain strategy. The objective is to get highest return in long term.
  • Debt - The mutual fund invests mostly in government and corporate bonds. The objective is to get returns, in short term, with very low risk.
  • Hybrid -The mutual fund invests 65–70% of the money in equity and rest in debt. The objective is to get moderate returns with moderate risk.

The best broad category of Mutual Funds to do SIP in, as you have already picked, is Equity Mutual Funds.

Equity Mutual Funds Categories

Amongst Equity Mutual Funds there are few categories based on the investment strategy of the Mutual Fund. The choice of category depends on the risk appetite and investment time.

Which SIP mutual fund category is best to start investing with?

  • Large Cap - Most of the investments are in the companies that have very high market capitalization (market size). These are also called bluechip companies. Although every fund house has a different definition of what is a Large Cap, but if you arrange all the public traded companies in India in descending order of their market size, the top 100 or so will be considered Large Cap. These are the least risky amongst the Equity Mutual Funds because of the sheer size of the companies.
  • Mid Cap or Small Cap - Such funds invest mostly in small or mid sized companies. Again there is no unanimous definition for the Mid or Small cap, but leaving out the Large Cap companies others can be categories as Mid, Small or Micro based on their sizes. These mutual funds bear relatives higher risk and therefore gives higher returns in long term. E.g.
  • Multi Cap - These funds invest across all sizes of the companies. Most of these funds try to identify high potential companies that are available for low share price. These are good if you don’t want to start with large sum. You can find Multi Cap funds that accept as low as Rs 500/month.

Best Funds to start investing

To start, you should invest in a portfolio of one top fund from each category. Take this Portfolio for e.g.

High Growth SIPs for Long Term - Diversified portfolio for Start Investing.

Which SIP mutual fund category is best to start investing with?

This Portfolio has Mutual Funds from each category. This way, you can diversify your investments, learn about all categories and in future, invest more in the category that suits your risk-returns expectations.

How to start SIP?

  • Signup and complete onboarding on registered Mutual Fund platform - Groww. The process is 100% paperless. You can continue to get advice for future investments.
  • Select the mutual fund portfolio that you want to invest in (according to the risk, term and returns)
  • Just make online payment once and set it for auto-debit for next month onwards.

Hope it helps.

Anand Suman Srivastava

Anand Suman Srivastava, I am a disciplined investor

Répondu il y a 118w · L'auteur dispose de réponses 133 et de vues de réponses 282.8k

A lot of buzz going into market about SIP. SIP are similar to the Recurring Deposit plans by bank in term of deposit interval. You can choose the investment amount and investment frequency as per your convenience. It may be monthly or quarterly. You can start with very small amount staring 500INR. There are two types of SIP available in the market:

1. Close Ended Fund

2. Open Ended or Perpetual SIP

In close ended SIP you choose a investment horizon for a particular time period while open ended funds provides you flexibility of investing as per your choice. You can take this option and exit at any time as per your convenience. There will be some exit load as notified by Asset Management Company. Currently it is 1% for most of the companies. Means if you are exiting below 1 year you will get 1% less profit what is showing by the plan.

Be ready while investing in equity mutual fund you are supplying your money to stock market. The great thing in mutual fund is that they invest your money in various sector simultaneously. Means if you are depositing 1000 per month in mutual fund you are investing small small part in many companies. This reduces the risk level to very low. Because all the sector will not perform bad at the same time One more term is here worth notable the size of fund plan. You will hear the terms Large cap fund, Mid Cap fund, Micro Cap fund, Sectoral based fund etc. Large cap fund are those which invests a major portion of their fund in large companies while mid and micro cap fund will invest in relatively smaller companies. Sectoral fund will not have a diversified sector rather they will invest in only one sector. For example if you are choosing SIP in XYZ pharma plan you will find that this plan is investing all the money in pharma sector companies like Lupin, Dr Reddy, Cipla etc.

So coming to the main question whom to start with? I will suggest to start with large cap fund for medium profit(normally 10-15%). If you are RISC apetite then you can choose Mid and Micro cap fund( normally 25-50% return). I will suggest to deposit your saving in 80% equity mutual fund and 20% fixed income source( RD, FD etc). If you are choosing SIP, I will suggest you to choose as many AMC as possible. AMC means Asset Management Company like ICICI MF, HDFC MF, Axis MF, SBI MF etc and choose as many dates and as many plans as possible. For example if you have 10000 to invest in Equity SIP choose atleast 3 AMC like SBI, ICICI and Axis. Now you have planned you will invest 4000 in SBI Mf, 3000 in Axis Mf and 3000 in ICICI Mf. Now choose 4 plans of each 1000 in SBI, 3 plans of each in Axis and 3000 in ICICI. Now choose dates for individual plan as 5, 10, 15, 20, 25 and 30. This will reduce your fear of stock market crash and increase on a particular date.

ADVISORKHOJ

ADVISORKHOJ, We write about personal finance and Mutual Funds.

Répondu il y a 139w · L'auteur dispose de réponses 551 et de vues de réponses 403.2k

It is great that you wish to start Mutual Fund investments. Depending on the amount you wish to invest, try for a mix of categories rather than just one category, if possible.

Large cap funds usually consists of equities of the companies that have large capitalization and drive the economy. As a category, it is very stable and does not fluctuate in good and bad times. Returns are almost consistent. Hence, if you are an investor who has a moderate risk appetite then this must be the one for you. This is one of the stable categories of Equity Mutual Funds. Equity Funds Large Cap this is a list of all the leading large cap funds.

Mid and Small cap funds are suitable for moderate to high risk takers. If you are planning to stay invested for a long period of time then this is a great category. The past performance of the category has been exceptionally well especially the Mid cap category. Small cap category when mixed with Mid cap forms Small & Mid cap and it helps to deal with the volatility associated with Small cap. Equity Funds Mid Cap, Equity Funds Small Cap these links will tell you the performances of these categories.

Multicap is a mix of Large cap and Mid cap and the combination is an excellent one. It allows you to get the high returns of Mid cap and stability of large cap. No matter which category you might pick the markets at a low now and this is the best time to invest. Markets follow the cyclical movement of lows and highs. If you invest in a low you will able to make the most of the upcoming highs. Hope this helps!

Priyanka Chakrabarty

www.advisorkhoj.com

Prakarsh Gagdani

Prakarsh Gagdani, Around 15 years of Capital market experience including Mutual Funds

Répondu il y a 113w · L'auteur dispose de réponses 1.1k et de vues de réponses 1.2m

SIP or Systematic Investment Plan is the safest way to invest in equity markets through mutual funds. It is in other words, is a disciplined investment method through which an investor pays a pre- decided amount of money to a designated mutual fund/or funds.

SIP in stocks is an extremely useful method that allows you to invest a certain amount of money in a set of stocks or exchange-traded funds at regular intervals (Weekly, forthrightly or monthly). SIP helps one stay invested consistently and beat market volatility.

Benefits Of SIP:

Disciplined Investment

No Lump-Sum Investment

Need Not Time The Markets

Lessens Time On Research As Selected Mutual Funds Do It For You

There are two categories of SIP available in the market:

A). Close Ended Fund

B). Open Ended or Perpetual SIP

Both the categories are considered good for all kinds of investors, but holding your investment in open ended funds allows you to take your money out the nest anytime you want to. Investing in closed ended mutual funds and tax saving (ELSS) mutual fund schemes cannot exit as they have a lock-in period of 3-5 years.

But then, when an investor chooses to take out his/her eggs out of the nest before a year of date (this is variable and is decide by AMC) of investment there may be a exit load levied by the AMC which may eat up a significant portion of your investment capital.

There are several banks and non-bank entities that run mutual fund businesses, they are Asset Management Companies. Some of them are SBI, Canara bank, IDBI, Axis Bank Mutual funds. Reliance, Aditya Birla, HDFC MF, etc.

Swati Aggarwal

Swati Aggarwal, Investor. Worked at a top tier investment bank for 5 years.

Répondu il y a 139w · L'auteur dispose de réponses 86 et de vues de réponses 169.8k

Salut Aniket,

The first thing to understand is that equities from different cap brackets (large, mid and small) are highly correlated. What that means in simple terms, is that if large cap equities are up then you are very likely to find that mid cap and small cap equities are also up. And if large cap equities are down then mid cap and small cap equities will also be down except on rare occasions.

Where cap matters, is that smaller cap equities generally have beta of >1 to larger cap equities i.e. if large cap equities move by a certain amount x, then mid cap equities will move by >1*x and small cap equities by even more than that. If we are in a period when equities are going well (say a good growth period) then small cap equities will do better than mid cap which will do better than large cap. During sell-offs the opposite will be the case. Large cap down by least followed by mid and then small.

So smaller cap equities promise greater returns with greater risk. Multi-cap funds will lie somewhere in the middle based on the cap composition. Based on only the information that you have provided in your question, since you are fairly young, it seems like a good idea to invest in an equity-heavy portfolio and also have some investment in mid and small cap equities. Hence you can consider multi cap funds.

If you are looking for fund recommendations, you can check our top picks in each of these categories:https://orowealth.com/#/screener These are funds which we expect to outperform category average. However please exercise your own discretion also.

It is also important to be aware of the direct plans of mutual funds. You can read more about these here:https://orowealth.com/#/blog#blo... Buying direct plans is a sure-shot way of increasing your returns over regular plans.

Shraddha Tiwari

Shraddha Tiwari, Investing in stocks since 2 years

Répondu il y a 9w · L'auteur dispose de réponses 122 et de vues de réponses 221.8k

Here are the Top 5 Mutual Fund Categories to invest :

Which SIP mutual fund category is best to start investing with?

  • Large-Cap Mutual Funds
  • Small-Cap Mutual Funds
  • Multi-Cap Mutual Funds
  • ELSS Mutual Funds
  • Aggressive Hybrid Mutual Funds

If you want know :

  1. Which Are the Best Categories for Wealth Creation?
  2. How Are They Different from Each Other?
  3. Which Category Is for You?
  4. What Should You Avoid While Investing?
  5. Top Funds from Each Category

Then visit at https://bit.ly/2BaQNRv

Anil Rego

Anil Rego, More than 20 years in same business and runing company Right Horizons.

Répondu il y a 138w · L'auteur dispose de réponses 166 et de vues de réponses 194.2k

Since you are beginning with your investments, we would suggest to start investing in a combination of Large and Midcap funds. However, these should also depend on the funds invested, you can add on Balanced Funds to your portfolio too. Here are few funds which can be considered for the purpose of investments

Large Cap

1. ICICI Pru Focussed Bluechip Fund – Gr

2. BSL Frontline Equity Fund – Gr

Mid Cap

1. Franklin Indian Smaller Companies Fund – Gr

2. HDFC Midcap Opportunities Fund - Gr

How awesome are hedge fund careers?

Alpesh B Patel

Alpesh B Patel, PDG de hedge fund, partenaire de 24Option.com. ancien chroniqueur FT.

Répondu il y a 44w · Voté par

Dean C Hurley, M.B.A. Finance, Fairleigh Dickinson University (1978) · Author has 120 answers and 419k answer views

As founder or employee? I can tell you as a founder, it is more difficult to launch one as each year goes by. When I founded mine in 2004, as a equity long-short trendfollowing fund, Cayman domiciles, Irish Stock Exchange listed, and a UK FCA regulated asset management company, costs were lower, competition was lower, and it was arguably easier to raise capital.

Of course as owner there is a huge responsibility and a lot of work; compliance, investor meetings, auditor meetings, accountants, oveseeing problems with fund administrators (we used Citco - the best and largest and they could not do simple addition!). Plus staff hires, fires etc.

So what about for employees? Well one of my staff now manages billions in the long only asset management industry at Investec. Another has gone into Private Equity at DN Capital (we employed her in private equity). The employees enjoy working in Mayfair in London.

And whilst my assistant went for a spin in my then Ferrari California, none of the staff had one! So it’s not like the TV.

When I wrote Mind of a Trader, I interviewed the world’s leading traders including Bill Lipschutz, who in 2016 was Hedge Fund manager of the year. None of them did it for glamour - it was a passion.

So I think the answer is, you have to love it, or any career, and that is what makes it awesome. We hire based on skills, and desire.

What was and has been awesome for me, is doing something I love and a business owner. That has compensated for not becoming the billionaire I thought I would be 12 years since launch!

Tom Groves

Tom Groves, Was a hedge fund partner. Isn't now. An improvement

Mise à jour il y a 24w · Voté par

John Hwang, Senior Options Trader @Morgan Stanley, Former and

Derek C. Cheung, Portfolio Manager, Honne Capital · Author has 1.4k answers and 7.7m answer views

I was a founding (junior) partner of a hedge fund a couple of years ago. I retired from the business earlier this year. Pretty awesome huh?

Except that I didn't retire because I'd made more money than I'll ever need. In fact, while I didn't lose money on the hedge fund I made less than I could have done doing a lot of other jobs.

I actually retired because I hated it. I hated the feeling of not being able to give investors the returns they wanted, even though I knew those desired returns were ridiculously unrealistic. I hated trying to deal with other market participants so desperate to make a buck to "earn" their bonuses that they would lie to my face as they tried to screw me over. I hated the nonsensical regulations imposed post credit crisis that actually incentivised me to take larger, wilder, stupider risks because it wasn't possible to trade in the sensible risk-averse way that I had learned to trade. I hated the constant stress and the feeling that I was playing a stupid game whose rules I didn't understand or didn't want to play by.

I hated most of all the fact that I felt like I could do "smart" things and guarantee failure, or take "dumb" risks that were bad for virtually everyone else (my partners, my investors, society in general) but that would maximise my own expected return. That was an ethical dilemma I battled for the best part of a decade, never found a solution to and now largely try to avoid by writing snarky blog posts and painting (Tom Groves (@tomgrovesart) • Instagram photos and videos) And hoping that my girlfriend makes enough money that I don't have to get a job in McDonalds or actually have to find a sucker to buy my paintings to make ends meet.*

Working at a hedge fund can have major advantages. Owning a hedge fund even more so. I set my own hours, I worked from home occasionally, I had the possibility of making some serious money. You might even find the job enjoyable - my former boss is a terrific, smart and talented guy and he LIVES for the markets. And he's done extremely well out of them, and if the hedge fund really takes off he'll end up one the richest people in the country. It can certainly be awesome. It can also be less than awesome. You don't hear so much from the people who found it the latter.


*This is a joke. My paintings are awesome and you do not have to be a sucker to buy one. You do however have to be patient, because it takes me a long time to paint them and the waiting list is getting longer by the day. Also, I doubt McDonalds would hire me.

Jay Kim

Jay Kim, Partner at Explorer Equity Group

Répondu il y a 48w · L'auteur dispose de réponses 593 et de vues de réponses 6.3m

How awesome are hedge fund careers?

“Hey…ummm…I’m with Zeke? He told me to ask for…Sel?”

J'étais nerveux.

It was my first “night out” on the company corporate card. I had just turned 26 and had moved to Hong Kong less than 6 months earlier. I’d never in my life been tasked with entertaining a client, let alone one of our biggest, at the brokerage firm.

My heart was racing as I stood there at the front of the line having pushed my way past all the other bystanders.

I squeezed right up next to the red velvet rope hoping that the tall tatted up Nepalese bouncer would acknowledge what I just said.

Without even looking down at me he reached over and unhooked the rope.

I was in…

I couldn’t believe it actually worked. Zeke wasn’t even his real name but somehow it had gotten me into Dragon I, the hottest club in Hong Kong.

I was quickly ushered in by “Sel” and brought straight to Table 16…the most coveted table in the indoor area, right in front of the DJ booth.

As I made my way through the dancing crowd I noticed two large magnums of Veuve Clicquot champagne making their way to Table 16…both with glaring bright sparklers lighting up the entire floor.

Standing right in the middle of the table with a sea full of models around him stood “Zeke” with a big ass grin on his face.

I knew this was going to be a good night…

“Zeke” was the first hedge fund manager I’d ever met in my life. He worked for one of the largest global hedge funds in the world and was moved over a year prior to help launch their Asia operations.

He was #2 at his firm in Asia and was the same age as me but miles ahead of me career wise it wasn’t even funny.

My boss had introduced me to him a few weeks back via “Bloomberg” and told me he was giving me my first real account to start covering.

“Jay boy…if you only remember one thing, it is this: when you take guys (clients) out…you take them out BIG.”

Not to disobey my boss, I ordered the next “round” of champagne with sparklers that night. After we’d finished my 2 bottles, another broker stepped up and order the next round.

Et un autre.

Et un autre.

I thought to myself…wow. This is unreal. This guy literally gets everything paid for him…

“Zeke” fit the role of the classic Hollywood hedge fund manager too. He was just like Bobby Axelrod in the series “Billions”. Rich, arrogant, and he wasn’t afraid to show it .

Zeke was always flashy with an expensive watch, fancy suit and a car and driver…He was literally “living the dream”.

What was my first impression of how awesome hedge fund careers were?

Ridiculously awesome.

And then something strange happened…

The longer I was in the industry and the more hedge fund managers I met, I realized that Zeke was actually the exception, not the norm.

10 years later, I find myself managing a hedge fund and my life is énormément different than Zeke’s.

I’m in the office by 7am and chained to my desk for most of the day. We run a global book so that means we have “risk on” around the clock.

I spend most of the day reading research and trying to come up with trade ideas, trying to resolve the inner conflict that I have when “forced” to have to actively invest someone else’s money to make a return even when there are no clear opportunities that present themselves to me in the markets right now.

After work I go home but I’m still “online”, checking my Bloomberg on my phone every 10 minutes since we have risk on in Europe.

I have a quick dinner with my family and after my kids go to sleep I stay up to watch the US markets open, hoping nothing blows up in my face.

By the time Friday actually rolls around I can’t even enjoy a night out cause I’m exhausted from the week (and US markets are still open Friday night).

Still think its awesome?

My life at a hedge fund is vastly different then Zeke’s….And certainly not as glamorous.

But working at a hedge fund peuvent be one of the most exciting and mentally stimulating careers in the world.

The excitement of putting on millions of dollars worth of trades and seeing an investment thesis actually pan out is exhilarating…and it can also be very lucrative.

It can be awesome and it can also ne pas be awesome.

But one thing is for sure…it’s certainly not “Zeke” awesome for every hedge fund manager out there…

Saswata

Saswata, Finance de désignation, CFA Institute

Répondu il y a 155w · L'auteur dispose de réponses 228 et de vues de réponses 319.1k

Thanks for the A2A. Although I have never worked for a HF but thanks to CAIA (chk www.caia.org) I know a bit more than most other people but only in terms of theory and my personal reality check with certain HF guys. Please note that the scope of HFs in India is limited thanks to the limited asset classes, depth and liquidity in both OTC and exchange platforms. India accounts for a minuscule share in the $2.5 trillion plus world HF industry.

First of all do not be discouraged by those 'futile traders' yes there is a term popular in market microstructure, who never made any money on trading thanks to assumption of risk which is not calibrated in advance, no mechanism for risk containment is followed and they are meant to be on the losing side.

HF jobs are lot more to that. If you are passionate about quantitative modeling then it is the place for you. You may join as analyst do well and rise up the ladder.

Your passion for economics and finance can be put to use for the qualitative or fundamental factors which will govern and corroborate your quantitative models. So there is a whole lot of activities depending on your passion you can do to be a successful trader.

You also employe various derivative instruments, exploit the interest rate differences, carry out carry trades, do some fx trading, some covered and uncovered interest rate arbitrage and various other things. You get to do both technical and fundamental analysis in HF most importantly.

Your trading style can be governed by Value, Carry or Momentum, based on your choice and comfort.

I am not getting into the popular equity long short or market neutral or other arbitrage trading saga as I wish to keep this free from jargons.

However hurdles can and will crop up which is pretty much possible in other jobs too.

For me its a great job and can be a dream come true opportunity for any passionate trader.

Igor Krol

Igor Krol

Répondu il y a 122w

I spent about 5 years working in trading ops at a very prestigious fixed income fund. A lot of the things people have mentioned here are true. You get paid really well relative to other industries even for the time and effort that you put in. You work with very intelligent people. I was left awe struck sometimes. However, I quit and never went back to finance. The problem for me was that I felt no purpose. Enriching faceless investors doesn’t really do it for me. Watching numbers change day to day got pretty boring after a while even if I had some impact on their direction. The market itself is an unrelenting reward and punishment machine. It never let’s you go. Think about that. Your life is not in your control. Your opportunity for self growth is limited by what the market allows you the time and space for.

David Jaffee

David Jaffee, Worked as an investment banker for 5 years. Founder of www.BestStockStrategy.com

Répondu il y a 31w · L'auteur dispose de réponses 766 et de vues de réponses 1.1m

The majority of hedge fund jobs suck.

Actually, almost all finance jobs suck.

I never worked at a hedge fund, so I’m sure you’re going to disqualify this answer, but I likely have more finance experience than 99% of the people who answer this question since I worked at multiple legitimate investment banks and also at a private equity shop.

I also know some bankers who went into the HF world and then returned to banking because they were promised more autonomy and freedom but they weren’t provided with it.

So… I guess it depends where you work and what opportunities you’re provided with.

I made $755,000 in 2017 by trading options and almost all my trades were profitable

Learn at BestStockStrategy

Or on YouTube at BestStockStrategy

Here’s some financial statements: Décembre 2017 - BestStockStrategy.pdf

Janvier - January 2018-BestStockStrategy.pdf

Cordialement,

The ONLY legitimate stock market coach

P.S. - PLEASE SHARE / UPVOTE this to counter the downvotes from scammers so that others see this ��

TAKE THIS COURSE IF YOU’D LIKE TO LEARN HOW TO MAKE CONSISTENT MONEY: Comprehensive Guide to Trading the Stock Market Successfully

What are the differences between an ETF index fund and a regular index fund?

Piaw Na

Piaw Na, Author of: An Engineer's Guide to Silicon Valley Startups (http://books.piaw.net/guide/index.html), Author ...

Répondu il y a 424w · L'auteur dispose de réponses 1.1k et de vues de réponses 8.3m

http://www.efficientfrontier.com...

"
Why deal with ETFs if you can own the same indexes without all the hassle of paying brokerage fees and spreads? Figure about 15 basis points in commissions and spreads each way. In the case of the iShares S&P 500 Index Fund, with its 9 basis-point advantage over the Vanguard 500 Fund, the ETF will take about three years to make up the difference. In all other cases, the iShares/Vanguard expense gap is smaller or even zero, so the ETF break-even points will range from very long to never. Even then, most of the time, the expense difference will likely be blown away by tracking-error differences. Nevertheless, there are several possible reasons for favoring ETFs:

  1. First and foremost, if you are not a U.S. citizen, ETFs may well be your best fund choice. Residents of the land of the free and home of the brave do not appreciate just how miserable mutual fund offerings are outside these shores. With outsized expenses and dismal ongoing performance, foreign mutual funds make the average U.S. brokerage house look like a charitable foundation. At a stroke, ETFs may make the World According to Bogle available around the globe.
  2. ETFs offer the possibility of greater tax efficiency. Certain asset classes are inherently tax-inefficient, because index reconstitution forces sales of appreciated shares. ETF shares are created and redeemed at the level of "authorized participants" who assemble and break apart the shares from and into their component stocks. The techniques involved here are enormously complex and center around two facts. First, when shares of an ETF are taken out of the market by sales, they are redeemed "in kind" by breaking them up into their component stocks; this is not a taxable event. Thus, "authorized participants" who do this are able to redeem the shares with the lowest cost basis, leaving the more tax-efficient high-basis shares in the fund. Open-end funds usually do the opposite, leaving the low-basis shares. Second, much of the tax-inefficiency of mutual funds or ETFs comes with the re-jiggering of the underlying indexes; in both cases, the stocks kicked out of the index must be sold for cash, incurring capital gains. The ETF advantage is that if it has incurred a large amount of share turnover because of expansion and contraction of its asset base, then when the index re-jiggering occurs, the shares sold would have a higher cost basis than the corresponding shares in the open-end fund. Two enormous caveats must be considered. First, tax-efficient large- and small-cap market funds for the S&P 500 and S&P 600, respectively, are available from Vanguard. Further, there are some asset classes, like REITs, which are tax-inefficient even in the ETF format because of dividends. So we are really only talking about large- and small-value funds here. Second, at present, the added tax efficiency is only a theoretical advantage; in fact, ETFs can and do declare capital gains distributions—about 60% did last year. Thus, the potential tax advantage will take years to prove itself. It would be well to observe how ETF small- and large-value tax efficiency pans out before calling your broker.
  3. If an asset class is not available from Vanguard, such as mid-cap growth and value, or the Russell funds, you can include it in your portfolio via ETFs. And going one step further, for my tastes, the Vanguard Small-Cap Value Fund is not diversified enough as a sole holding in this corner of the equity universe—it holds only 403 names. On the other hand, the Russell 2000 Value iShares Fund holds many more—1221 companies.
  4. Paradoxically, if you’re a very small investor and have fund holdings below the $10,000 threshold, you will incur the Vanguard $10 annual fee. For example, someone investing $3,000 in a Vanguard index fund will lose 0.33% of annual return from the fee, whereas he can purchase the appropriate ETF for a $10 commission at eTrade and never pay another cent in "low-balance" expenses.

ETFs obviously hold certain advantages for institutional players, particularly that they can be sold short. The notorious Nasdaq Cubes—QQQ—actually saw net share créationduring the recent Nasdaq collapse for just this reason. Interesting factoid: the average holding period of a Cubes share is four days. ETFs also have a more dubious advantage for small investors: they can be traded intraday. Whoopee.
In the opinion of Mr. Wiandt, the common bugaboos raised about ETFs—the discount/premium problem, the bid/ask spread, and dividend-reinvestment drag—are not significant. In most cases, these are less than 0.25%. In addition, as more shares are created and traded, the arbitrage opportunities at the authorized-participant level will narrow the discount/premium spreads even more. But Mr. Wiandt raises a more important point, namely, that "an ETF is only as good as its underlying index." If the index consists of liquid stocks, then its ETF will trade with reasonable spreads and minimal discount/premium problems. And if the markets are highly illiquid, and especially if there are currency constraints, as occurred in the past few years with the iShares Malaysia Fund, then the discount/premium problem will be enormous.
Finally, there are investors who should ne pas use ETFs. If you’re making periodic investments or frequently rebalancing your portfolio, ETFs are a waste of time and money—you’ll be eaten alive by commissions."

Michael Kane

Michael Kane

Mise à jour il y a 205w

Hi, this is Michael Kane, VP of Product Growth at Amélioration, an automated investment service.

First developed in the early 1990s, ETFs now account for more than $ Billions 1.9 in assets in the United States, and are in the process of finally surpassing index mutual funds.

What has been causing such rapid growth in ETFs? Here are some of the advantages that ETFs have over mutual funds:

What are the differences between an ETF index fund and a regular index fund?

À bas prix
Most ETFs are index funds, aiming to deliver the performance of a stock, bond or commodity index, minus fees—no more, no less. These funds don’t have managers who are paid to “deliver alpha” or market-beating returns. Instead, ETF portfolio managers are quantitative disciplinarians with a laser-like focus on hugging the index. The cost of an ETF covers licensing the index from a data publisher, paying administrative fees (lawyers, trusts, exchanges) and compensating the managers, who tend to work on multiple ETFs at once. All of this is bundled together into what is known as the expense ratio.

In contrast, many mutual funds—particularly those that are actively managed—add costs through distribution agreements with brokerage platforms or financial advisors, and some are only available direct from the manager. With ETFs, the gatekeepers (and toll takers and middlemen) have been marginalized, allowing greater benefit to accrue to the end investor—you.

For individual investors who want to build a portfolio, basic stock and bond index ETFs tend to be cheaper than equivalent index mutual funds. Consider the price difference between Vanguard’s Total Stock Market ETF (VTI) and equivalent mutual fund (VTSMX). They both follow the same CRSP U.S. Total Market Index, but there is a significant cost difference. VTI has an expense ratio of 0.05% and VTSMX has an expense ratio of 0.17%.

For individual investors who want to build a portfolio, basic stock and bond index ETFs tend to be cheaper than equivalent index mutual funds.

Diversifié
Most exchange-traded funds—and all ETFs used by Betterment—are considered a form of mutual fund under the Investment Company Act of 1940, which means they have explicit diversification requirements. They do not have any over-concentration in one company or sector, unless called out specifically in the fund offering prospectus. Diversification, both within a fund and throughout a portfolio, has been said to be the “only free lunch” in finance.

Tax-efficient
All mutual funds are required to distribute any capital gains to their investors at the end of the year, regardless of individual trading activity or the timing of a purchase—these are distinct from capital gains you would realize from selling the share of the fund itself. That means you could buy a new fund in December and receive a taxable distribution just a week or two later! But when it comes to tax efficiency, ETFs have two jewels in their crown.

First, most ETFs already have the tax efficiency of index funds—which don’t tend to generate internal capital gains due to churning (frequent buying/selling of stocks and bonds due to investor or manager movement).

Second, the two-tiered market by which shares of ETFs are transacted isolates investors from additional tax consequences and limits capital gains from accumulating within the fund.

When large investors or market makers, known as authorized participants, notice an imbalance between the price of the ETF and the aggregate of the prices of the underlying securities the ETF tracks (or they need to fill a large order of ETFs for a customer), they essentially swap the underlying stocks or bonds for shares of the ETF, or vice versa. This transfer in (or out) of the fund is known as “in-kind” and limits the tax consequences for the fund by allowing it to constantly raise its cost basis of individual securities by swapping out the securities with the largest built-in gains first (swaps as opposed to sales don’t realize the gains.) In the event that the fund needs to sell securities themselves, having a high basis would limit its tax liability. Non-ETF mutual funds don’t have this luxury.

Flexible
ETFs are the duct tape of the investing world.

They can be accessed by anyone with a brokerage account and just enough money to buy at least one share (and sometimes less—at Amélioration we trade fractional shares, allowing our customers to diversify as little as $10 across a portfolio of 12 ETFs.) While most ETFs are straightforward in their exposure, they are used in so many ways, that they have become an essential tool for all kinds of investors—short-term traders and long-term investors alike. This versatility as an investment vehicle helps keep ETF pricing true to the price of the underlying assets held by the fund.

Sophistiqué
ETFs take advantage of decades of technological advances in buying, selling and pricing securities. Alongside their modern structure sit myriad data points watched by investors and advisors who are constantly analyzing the funds and their investments to make sure that the fund prices stay true. They are looking at what they know about the portfolio, what is happening in the market, and how the ETF is trading throughout the day. The net effect: multiple market forces keep the ETF trading in-line with the underlying holdings.

Pour plus d'informations:
https://www.betterment.com/investing

Prakarsh Gagdani

Prakarsh Gagdani, More than 14 Years of Capital Market Experience

Répondu il y a 1w · L'auteur dispose de réponses 1.1k et de vues de réponses 1.2m

Exchange Traded Funds (ETF) is a collection of securities such as stocks, bonds, gold, foreign currency, etc. which are traded like shares in the stock market. Due to this, there is a continuous change in the price as they are bought and sold.

Index Funds are mutual funds in which their portfolio replicates a particular index. They are passively managed and hence play an important role for investors looking for a long-term investment with low cost.

Différences:

  • Exchange traded funds are traded much more easily as compared to Index Funds.
  • You can buy or sell index funds during the trading hours, but the price at which they are bought or sold is decided at its NAV i.e. At the end of each trading day. ETF’s on the other hand, can be bought or sold at the price reflecting during the trading hours making them more flexible.
  • ETF offers a lower expense ratio than index funds.
  • Dividend payouts from an ETF fund are directly credited to your bank account. For index funds, you are given a choice between a growth option or dividend reinvestment.

Matt Planner

Matt Planner, Financial Blogger, Engineer

Répondu il y a 60w · L'auteur dispose de réponses 97 et de vues de réponses 122.5k

An ETF is a low Fee index fund that trades like a stock. You will pay a low management expense ratio (MER).

A regular index fund, you probably mean an index mutual fund. While these have lower fees than actively managed mutual funds, they still don’t compare to ETFs.

Check out this video for an idea of how your investments growth will differ over 40 years, comparing ETF index to mutual fund index and active mutual fund.

While the difference in the short run is very minor, the graphs in the video really show the impact after 40 years, which amounts to a typical career if savings.

Hope this helps!

Michael Taylor

Michael Taylor, Investment expert at The Stock Dork

Répondu il y a 25w

What are the differences between an ETF index fund and a regular index fund?

ETF vs. Index Fund: Similarities

Rules Based Approach

Since an index fund tracks an index, fund managers are trying to replicate the performance of the index. They are not “stock picking” in hopes of beating of beating the market, instead they are following specific rules in order to replicate the tracking index. That said, the expense ratio of index mutual funds are generally far less than a mutual fund that has an active manager.

The same can be said about ETFs that track an index. These funds are not actively managed, instead they are following specific guidelines in order to track the benchmark index.

They Both Offer Similar Products

For example, some index funds that track the S&P 500 include: Schwab S&P 500 Index Fund (SWPPX); T. Rowe Price Equity Index 500 Fund (PREIX)Et Fidelity Spartan 500 Index Investor Shares (FUSEX).

That said, ETFs that track the S&P 500 include: SPDR S&P 500 ETF (NYSE: SPY); iShares Core S&P 500 ETF (NYSE: IVV)Et Vanguard S&P 500 ETF (NYSE: VOO).

Furthermore, ETFs and index funds are both considered pool investment vehicles that are highly transparent.

ETF vs. Index Fund: Differences

ETFs Are More Accessible & Liquid

ETFs are traded on the stock market. All you need is an online brokerage account to get started. You can buy and sell them the same way you do a stock. On the other hand, index funds must be bought directly through a broker or the actual fund itself.

In addition, ETFs can be bought and sold throughout the day, including pre- and post market hours. Generally, index fund transactions are cleared after the market closes.

For example, if you’re long the T. Rowe Price Equity Index 500 Fund and want to bail out at 10 AM because you feel the market is going to sell off, the transaction won’t be cleared until the end of the day, potentially leading to bigger losses.

To learn even more about this issue, check out the short guide I wrote recently here.

Tobias Lütke

Tobias Lütke, CEO Shopify

Répondu il y a 424w

A "regular" index fund is usually a mutual fund. They are slightly different. The biggest problem with mutual funds that track indexes is that they usually need fairly high investments to buy into the fund. The Vanguard mutual funds for example cost 100k to enter for the admiral class shares (comparable MER to their ETFs) and you should at least hold 3 to 4 different classes of assets in your portfolio to offer a hedge against intrest rate hikes and so on.

ETFs can be bought like stocks at any time and require no minimum commitments. However, just like normal stocks you will have to pay brokerage fees which most mutual funds don't have.

How does a fund of hedge funds conduct due diligence? This also applies to the ways fee investment advisers to evaluate the hedge funds into which they invest client money.

Nate Anderson

Nate Anderson, Hedge fund due-diligence/capital raising

Mise à jour il y a 189w · Voté par

Manasi Gupta, M.B.A. Finance, University of Illinois at Chicago (2007) and

Jack Wei, Hedge Fund Analyst · Author has 409 answers and 2.1m answer views

Short version: We turn over every stone, and keep turning before, during, and after an investment is made.

Long version: I perform hedge fund due-diligence (DD) for family office and institutional investors so this topic is quite near and dear to me. I’m proud to have steered our clients away from several funds that turned out to either be fraudulent or blew up for operational reasons. We’re dealing with allocation sizes in the tens of millions so the stakes are obviously very high. I’ll try to be as detailed as possible but this will really only scratch the surface at best.

There are several objectives to hedge fund DD (and it’s not all about making sure the manager isn't a Madoff.) It helps to recognize from the outset that each hedge fund is first and foremost a business, and for businesses to be successful they need to have a differentiated product, a repeatable process for creating that product, and as a potential client you need to evaluate your own need for the product. In other words, what is the manager's differentiating 'edge' (see Nate Anderson's answer to As a fund manager, what’s the best response to, "What is your edge?" when asked by a potential investor? I talk about the differentiated strategy approach and team experience. I’m not sure there’s a genuine structural edge in the investment business.), what is the process for exploiting that edge, and how does it fit into your portfolio?

To answer these questions investors must gain a deeper understanding of all of the following: (a) the strategy, (b) the investment process, (c) the people involved in the fund, (d) the ‘business’ operations of the fund, and (e) the performance track-record.

Révision initiale

Typically, the DD process starts with an initial document review to glean the basics and see if its worth taking the meeting. I generally start with the tearsheet, presentation, and recent investor letters. Every investor has their own limiting criteria, but depending on the investor some will pass right away due to factors such as:

  • Size of the fund. Some investors want the sense of ‘safety’ from a large fund, while others prefer smaller funds due to their higher return potential. (My diligence is generally focused on smaller funds, which may have higher operational risk, so the research burden tends to be higher.)
  • Undifferentiated strategy or an unfavorable strategy for the market environment.
  • Lack of a track record. Many institutions and investors require 3 years of track-record or a ‘portable’ track record from a manager's previous firm in order to get comfortable with their historical ability to perform. Again, I have some investors who are comfortable being 'day-1' money which raises the due-diligence threshold.
  • Poor relative or absolute historical performance.
  • High volatility or large drawdowns.
  • Poor quality of investor communication. The only thing that differentiates a 'black-box' from a transparent fund is communication. If the communication from managers is sparse or uninformative it is tough to get comfortable with a strategy. We generally like to see monthly performance updates with quarterly commentary. Anything more frequent may mean the manager is spending too much time writing, and anything less means we are in the dark for too long.
  • Lack of credible third-party service providers (auditor, independent fund administrator, prime broker, legal counsel.) Third-party service providers are the checks and balances on a manager's operations. Investors do not get compensated for taking on unnecessary operational risks, so if we don't see auditors, administrators, and prime brokers in place we will pass immediately.

réunion

If the manager passes our initial document review we'll take a meeting. The first meeting(s) are usually the standard pitch, a walk-through of the presentation, and a high-level Q&A. Though we'll have an idea going in on what we want answered and what we'd like to discuss, we let the manager start with their pitch and always end up free-forming after a while. The idea is to get a sense of the manager, personality, and to probe on different areas of interest or concern and get a sense of whether it holds up.

If the strategy, performance, fund structure, and people all pass the initial smell test and merit further interest, due-diligence begins in earnest. An initial document list is requested which generally includes:

Marketing materials:

  • Investor letters since inception. These give us a sense of the quality of communication, investment ideas, research, and insight into the manager’s personality and approach.
  • Relevant PR such as interviews, press releases, and published articles.
  • Due-diligence questionnaire aka the ‘DDQ’. This is a key document that asks 100+ detailed questions about the fund. The AIMA (Alternative Investment Management Association) version is the most common DDQ. We review the DDQ provided by the manager and compare it with the AIMA DDQ to see if the manager deleted any questions from the list. Usually, when a question is missing from a DDQ it's because it was irrelevant to the strategy, but sometimes a deleted question can be HIGHLY relevant and show what questions the manager doesn’t want to answer. (Here's a random completed DDQ off Google in case you’d like to get a sense of what that document looks like: Page on opcvm360.com)
  • Research samples. Again these give us a sense of the depth and focus of the investment process.

Juridique:

  • Subscription documents. We review to make sure everything is consistent with the PPM.
  • Partnership agreements. These detail terms of the business structure and can also detail nuances of the fund structure.
  • State certificate of organization/LP certificate/state registration doc, IRS W-9 tax ID form. These are mostly just confirmatory documents.

Autre:

  • Audits since inception. The independent auditor’s report is of critical importance, as it will reconcile assets, portfolio balances, performance, and often provide insights on portfolio construction, liquidity of underlying assets, and back-office protocols.
  • Independent prime brokerage report as of last completed audit. This allows us to see even more detail on the portfolio from the time of last audit and allows us to reconcile the audit with the actual portfolio. If anything doesn’t line up with the audit it means either we or the auditor are missing something.
  • La liste de référence. They will all obviously be glowing references, but the choice of references can be very important. Who they leave out of the reference list is often more instructive than who is included. That being said, sometimes good information can be found through the references.
  • Service provider contact information. We verify the relationship with each service provider, and perform due-diligence on the service providers to get an understanding of the terms and length of the relationship with the fund.
  • Any external or internal risk reports. These give us a sense of how they measure risk, what risks they control for, and how they fall within those parameters.
  • Regulatory registration documents such as form ADV for advisers. This is more confirmatory information but can also show critical pieces of information such as assets under management as of a particular date, key principals, number and type of clients, and compliance with the law.

Once the document review is completed, you’ll likely have a better understanding (and many new questions) about key issues surrounding the 3 P’s: people, process & performance. The next step is to dig on areas of interest or concern to learn more on each of these three areas.

Gens

One of my favorite stories on manager due-diligence came from a well-known investor who passed on a hedge fund because of a raincoat:

The investor wanted to get to know the manager better, so they agreed to go on a hike. Halfway up the mountain it began to downpour. Unfortunately, the manager hadn’t checked the forecast and spent the latter part of the hike completely drenched. The (dry) investor realized at that point that the manager was a little too focused on the adventure ahead of him and not at all focused on managing the predictable risks along the way. The investor passed due to concerns over risk management.

We haven’t passed on any managers over rain gear, but I think the point is relevant. In poker, you must observe everything about a player; betting patterns, style of play, tolerance for risk, and personality. You piece together an understanding of the person from the data in order to get a sense of their tendencies. The same applies to due-diligence on people. Fortunately we have a lot more data to work with than at a poker table:

  • Background checks. We use a service that looks for criminal, regulatory, and civil infractions, including Anti-Money-Laundering checks on all principals and key employees of a prospective firm.
  • Regulatory checks. The Financial Industry Regulatory Authority (FINRA) has a very comprehensive database of brokers and investment adviser firms that shows whether individuals or firms have had any regulatory infractions, their registration status, whether they’ve had any arbitration awards issued against them, and the full employment record of registered individuals (among other things). It also ties into the SEC database which is often relevant for larger firms. All of this is obviously extremely valuable background information. One little trick we use is to match up the employment record of the principal with the bio in their marketing materials. Often they will leave firms out of their bio if they had a bad experience there, though they'll include it on their regulatory filings. It may bring up points that require further digging: BrokerCheck: Research Brokers & Investment Advisers
  • Back-channel reference checks. This is probably one of the hardest things to do effectively, particularly for industry outsiders, but this can be a source of absolutely critical information. This is the scuttlebutt; the “I’ll talk to my guy who worked in this manager’s Deutsche Bank division when he was a portfolio manager...” This approach is often how you get the ‘real’ story behind a manager.
  • Regular ol’ reference checks. You have to cut through the glowing praise and ask the right questions to really get a sense of the truth, but these can be helpful.
  • Direct interviews with the manager. This doesn’t have to be a cross examination but during the meetings there should be a component of confirmatory questions along with getting a sense of the manager’s personality, background, and approach.
  • Google. (Never underestimate!) I was asked by a family office to diligence a manager and I googled the manager before anything. Past investors had posted on a forum that the manager lost 90%+ of their money by making risky bets then doubling down when the original bets didn’t work out.

Skin in the Game
Also worth noting is that it's incredibly important to know that the manager has invested in their own fund, and that they are risking their assets alongside yours. Most investors want to know what percentage of the manager's liquid net worth is in the fund, and will often request documents to prove it.

Operational and Investment Process

Now that you understand more about the people you’re working with, you want to understand the structure and processes that constrain them.

A hedge fund, like any other business, creates a product (a portfolio). In order to generate consistent portfolio performance you need to understand the sausage factory, including both the investment process AND the operational processes in place.

I know what you’re thinking—operations are ennuyeux. The sexy stuff is how people come up with their brilliant investment ideas. Unfortunately, the operations and business side of the fund are not trivial matters; research has shown that over half of all hedge fund blow-ups occur due to operational issues that have nothing to do with the investment process. As unappealing as it is to try to figure out the nuances of how Net Asset Value is calculated and reconciled with the fund administrator, it’s even less appealing to lose a billion dollars because you didn’t take the time. (Yes, turning over every stone means turning over the ugly ones too.)

I’ve seen institutional investors pass on funds for reasons which may not be immediately obvious problems to a new hedge fund investor. Below are some examples. If you can think through the issues or potential issues with each real-life scenario below then you are off to a good start:

  1. A small fund required a single signatory on cash transfers.
  2. A fund had legal entities for their marketing, deal sourcing, and investment divisions of the firm.
  3. A large, well-known fund has used a big-4 firm as their auditor since inception, and worked with several offices of the firm over the course of their relationship.
  4. The same fund in #3 managed their fund administration internally.
  5. A fund was down 3% one month.
  6. A fund had rehypothecation agreements in place with their Prime Broker, a major, well-respected Wall St. bank.

I imagine some of the above might not even sound like English. So what does it mean and why were these all problems for the prospective investors?

  1. Single signatory. Like any other business, embezzlement can be a problem for hedge funds. Requiring a single signatory to move cash, particularly for a small fund, means that a founder/key employee can potentially loot the place without limits. It’s not unheard of for a business owner to get served divorce papers then decide it's time for an early retirement in a tropical, non-extradition friendly country. On a less major scale, an employee may embezzle smaller amounts systematically over time. Hedge funds generally have much higher asset liquidity than traditional businesses, and therefore cash stewardship is of utmost importance. For these reasons, institutions usually require double signatories on cash transfers, often with one signatory being a credible, independent fund administrator.
  2. Multiple legal entities. Separate legal entities are put in place to limit liability (and potentially transparency) between entities. Whenever a manager puts legal shields in place between different operational aspects of a fund the investor should have a very clear understanding of why that is the case. In this case the reasons didn’t pass the smell test, and were likely in place to obscure important information for investors.
  3. Using several offices of the same accountant. Accountants understand the concept of multiple legal entities all too well. For example, each office of PWC may have its own separate legal entity which protects the greater organization and other offices from shared liability. In other words, working with 3 different offices of the same firm can be like working with 3 completely different firms. Another fact about accountants: If they find a problem with a fund (or a company) they will often resign rather than report their suspicions. In this particular example, 3 offices of the same accounting firm resigned over the course of the life of the fund. Unfortunately, most investors just thought: "Well, the manager has used a credible firm since inception, therefore it’s all kosher." Wrong.
  4. In-sourced administration. Approximately 90% of all hedge fund frauds would be eliminated through use of a credible outside fund administrator to manage valuation, NAV reporting, subscriptions/redemptions, and the back-office functions of a hedge fund. Madoff (again) in-sourced his administration. He couldn’t have reasonably pulled off his fraud had he used a credible outside administrator.
  5. Fund down 3% in a month. This by itself isn’t a problem. Some funds have high volatility and +/- 5% or more in a month isn’t unusual. The problem was that this particular fund’s investment strategy was expected to generate a slow, consistent half percent a month. A drawdown in one month of 3% in the context of that strategy was a red flag. The next month the fund was down 9% and subsequently lost another 20% before shutting down.
  6. Rehypothe-what?? Rehypothecation is when the fund lends their securities to their prime broker. The broker can then use the securities as collateral to lend against, and will generally pay the fund a small fee in return, which helps lower the fund’s brokerage expenses. Here’s bottom line: When Lehman Brothers went bankrupt, this small distinction determined who 'owned' the assets. It was the difference between blow-up or solvency for many funds. (Literally billions were lost or saved over this nuanced operational detail.)

In addition to operational processes, the investor must understand the investment processes in order to get a sense of how the fund’s portfolio is constructed. How does the manager source ideas, and what does their own research consist of? What kind of risks does the fund take? Risks such as currency, security, sector, market, interest rate, volatility, and countless other risks can be a part of the portfolio construction process. How does the manager make sure they are adequately compensated for those risks? How do these risks fit into the investor’s broader portfolio? Professional portfolio managers must account for all of these factors with the funds they invest.

Performance.

On every disclaimer on every document you will read from a hedge fund it will say: "Past performance is not indicative of future results." I'm generally not a fan of legalese but this bit should be taken as gospel. Historical returns are in the past, and without understanding them in the context of the strategy, the risks taken, and the changing nature of the strategy in the market then those returns are meaningless. Statistics lie. At the very least they can mislead: Did you know that the Vatican City has 5.9 Popes per square mile? True fact.

Lets go through another quick example. If a manager tells you “we returned 100% last year.” Are you:
(a) Excited
(b) Interested
(c) Skeptical/unsure
(d) Overwhelmed by feelings of inferiority over your own lousy returns

If the answer is anything other than lots of ‘c’ with a little bit of ‘b’ then you need to learn more about what performance means. (If your answer is ‘d’ I suggest yoga.)

Performance needs to be understood in context. What risks did you take to make 100%? What is the volatility an investor can expect on those kinds of returns? (No matter how great your returns are, you only need to lose 100% once to wipe it all out.) Statistics like Sharpe ratios, maximum drawdown, correlation, and volatility can only really be helpful in the context of the market and the strategy that contributed to that performance.

I once met with a manager who returned 142% in 2009 and 55% in 2010. Those were eye-popping returns, and they had all the right service providers and statistical ratios to ‘prove’ how credible and great they were.

The manager told me that their whole strategy was to analyze momentum price signals, because “when you focus on one thing all day you get pretty good at it.” They were a complete black box as far as their model and their investment process, but the manager shared one aspect of the model: “When the market goes up we are able to capture those returns, but as soon as the market starts to drop, the model shuts down in order to mitigate any losses.” Classic baloney. (Explanation: Unless you know whether the market will continue to go down or up you can't determine when to turn the model on or off. He was basically implying that they could perfectly predict the direction of future price action in the market.)

I passed on the fund, and it literally blew up the next month. (To be fair, I didn’t realize it would blow up so soon, though I did know that it would inevitably blow up with those returns coupled with no credible explanation of how they produced them or why they would persist.) The moral is that it's hard to find an edge and generate consistent returns, and historical performance (whether good or bad) has to be understood in full context.

Général

This overview really just scratches the surface but hopefully the framework and actionable tips are helpful. Many institutions view their due-diligence process as proprietary, but personally I’d rather see all investors have a deeper understanding of the process. It’s bad for the industry when charlatans run around with impunity, and quality diligence helps lift the entire profession. Most hedge fund managers are good people (honestly), but even among good people there can be a lot of average performers and undifferentiated strategies. A good due-diligence process can be both informative and collaborative-- in addition to learning about the managers our DD process often leads to operational improvements among funds we work with.

Take your time, and don’t be afraid to ask even seemingly stupid or awkward questions. The best questions are often a little bit awkward. Always keep in mind that the next stone you turn over could be the difference between gaining or losing everything. If a manager seems reticent to provide information or answer your questions its generally a sign of what the relationship will look like going forward. Investments in hedge funds are ultimately partnerships and the good managers will understand and appreciate your need to learn before investing. Good luck!

Paul Kaldy

Paul Kaldy, Product Manager at Facebook (2012-present)

Répondu il y a 83w · L'auteur dispose de réponses 63 et de vues de réponses 103.6k

You can also verify certain claims by checking their records. For instance, if a fund says that they made going long and short in a industry with very low volatility and no movement then you might get suspicious. Also, if the manager cannot explain his strategy well and keeps telling you that it is a secret, then you may have some concerns. However, it is still hard to do a good due diligence due to the information asymmetry.

Only a good Service will give you a rough idea of conduct due diligence. Here is a great service that offers really powerful fund of hedge funds conduct due diligence. I cooperated with the professional business planners from https://www.ogscapital.com/servi... company. It was a great experience!

Pureum Kim

Pureum Kim, does research on hedge funds

Répondu il y a 234w · L'auteur dispose de réponses 2.4k et de vues de réponses 2.5m

I believe that they interview the hedge fund managers and further ask other experts who are familiar with the hedge fund's strategy. You can also verify certain claims by checking their records. For instance, if a fund says that they made going long and short in a industry with very low volatility and no movement then you might get suspicious. Also, if the manager cannot explain his strategy well and keeps telling you that it is a secret, then you may have some concerns. However, it is still hard to do a good due diligence due to the information asymmetry. But you can always protect your fund of funds by diversifying and getting favorable terms when investing in the hedge fund.

Kevin Waechter

Kevin Waechter

Répondu il y a 174w

At the company, they interview the hedge fund managers and ask other experts about hedge fund's strategy. Everyone can verify certain claims by checking their records.

La source: Lieu

Can you fund your own Kickstarter? If so, is the only drawback that Kickstarter takes a 5% fee?

Chern Ann Ng

Chern Ann Ng, Millions de $ 46 financés sur Kickstarter

Répondu il y a 198w · L'auteur dispose de réponses 305 et de vues de réponses 576.8k

Réponse d'origine: Can I contribute to my own Kickstarter?

No, you cannot. Kickstarter has in the past cancelled projects where creators have allegedly done that. This is explicitly stated here: Questions du créateur

Stijn Hommes

Stijn Hommes, Bailleur de fonds Avid Kickstarter.

Répondu il y a 49w · L'auteur dispose de réponses 5.4k et de vues de réponses 4.3m

As Chern Ann Ng explained, neither Kickstarter, nor their payment partners allow you to contribute to your own Kickstarter project.

That’s a good thing, though, because it tends to get you in serious financial trouble. (I’m assuming you’re raising money to fund a project you can’t actually afford to do without the raised funds. If you can, Kickstarter is the wrong place to begin with).

Basically, the 5% fee would only be the first of several downsides. You’d also have less of a potential market than expected for whatever you’re making and you’d pay yourself into the obligation to deliver on the project for the other people who backed you.

If a project is failing and you don’t know why, then let it fail, read up on KS Lessons et réessayer plus tard.

Harald Korneliussen

Harald Korneliussen, connaît une partie de l'histoire du système de gage de seuil

Répondu il y a 254w · L'auteur dispose de réponses 682 et de vues de réponses 644.9k

No, this is against the Kickstarter terms of service (or at least it used to be, can't find the notice of it right now). You cannot contribute to your own project. Amazon Payments won't permit it.

The credit card companies see paying yourself as an attempt to give yourself a cash advance. Therefore, Amazon will shut down your payments account if it detects a payment to you from you.

I, as a backer, also see it as somewhat dishonest to support your own project. It gives the impression that there is more public support than there actually is. It's better to be careful about where you set the limit, and if you can afford to support your own project with $1000, you instead set the limit $1000 lower.

David Garber

David Garber, Spécialiste de la liaison (2015-present)

Répondu il y a 16w · L'auteur dispose de réponses 496 et de vues de réponses 41.8k

No. Kickstarter policy specifically prohibits creators pledging to their own projects. Some creator try to do so, anyway, but Kickstarter has clever ways of identifying when they are doing this. Creators who pledge to their own projects risk having those campaigns cancelled. If you can’t get funded without using your own money, then you may need to rethink your product.

Kyle Tummonds

Kyle Tummonds, Défenseur des médias sociaux chez Thrinacia Inc

Répondu il y a 43w · L'auteur dispose de réponses 429 et de vues de réponses 44.8k

I would say yes and no. Lots of people donate to their own Crowdfunding campaign as a means to entice others to donate as well. If you donate, you are losing money, as a means to better market your campaign. No one wants to be the first one to arrive to a party, and sames goes with Crowdfunding. In the long run however, you should not be worried about receiving your first donation as long as you run a successful pre-launch campaign. For more details go ici .

Augustin Kennady

Augustin Kennady, Directeur des relations avec les médias chez ShipMonk (2016-present)

Répondu il y a 52w · L'auteur dispose de réponses 534 et de vues de réponses 2.8m

I complètement misread the question.

I thought you asked if you could fund your propre Kickstarter. As in, you want to use Kickstarter’s platform to fund your own Kickstarter-esque crowdfunding platform.

I love this idea, and I think you should start this campaign immediately. Bonus points if you call it something like “FireUpper” or “StartUpper” or “GetOffTheGrounder”.

Maybe this has been done before, but the concept makes me giggle.

And, as other people have pointed out, you’re not permis to fund your own Kickstarter from Ton compte. Are there ways around it? Yes. Of course.

But just remember: if you have to push your Kickstarter campaign over the top, and you’ve truly done everything you could to get it out there, maybe it just isn’t ready for market at this time.

Bonne chance là-bas!