There was an excellent post yesterday in the Wall Street Journal Online on How the Rich Invest.
The summary was: the rich don’t invest in ETFs and Mutual Funds – but allocate more to actively managed opportunities like Hedge funds that are out of the reach of the less rich. Grossly oversimplifying the article – the cut off for Rich in this case is $5m-10m range and the reason they don’t invest in ETFs and Mutual Funds is they CAN invest in other actively managed instruments wheras the small guy (sub $1m assets) can’t.
But the article also ends
Hedge funds and private equity also remain largely the purview of
the wealthy, since their minimum investment levels are often in the
millions (granted, fund of funds and pensions have made it a little
easier for the little guy to get in).
That’s not to say that
hedge funds and private equity returns are necessarily BETTER than
mutual funds and ETFs. With returns for “private money” under pressure,
with fees going up, and investments becoming more and more correlated,
I would argue that while the rich may have more exlcusive investments,
they don’t always get better returns.
and that is precisely what we are all about at Covestor. The institutions don’t have any lock on talent and the world’s changed – thanks to the SEC and the Internet – I have the same access and costs as the big hedge funds or bloated mutual fund managers – so there should be a free market, and a way for real talent to shine and be rewarded.