| I'm adjacent to the space and I'd disagree with this statement: "fleecing pension funds run by financiers who aren’t smart enough to get into PE." Institutional Investment Funds (pensions, endowments, sovereign funds, etc) need returns well beyond inflation to ensure long term stability. To do this, they will mix and match various different investment vehicles to minimize risk. This means a fund will have a varying percentage of funds invested in stocks+ETFs, commodities+futures, cash in hand, real estate assets, IP assets, and greenfield opportunities. Essentially, you are dealing with dozens of different financial instruments, and while you may have an above average understanding of how all these work, you won't have the resources, staffing, or ability to optimize returns on all these instruments. This is why Funds end up having VC firms make VC investment decisions, PE firms (itself a loaded term because PEs specialize in different markets and sectors) making equity investment decisions, etc. If you are able to specialize in one specific sector (aka have both the domain experience and the network of founders, operators, and managers) then at that point you may as well open your own firm and manage investments on the behalf of other institutional investors. It's all about specialization. Also, fund operating costs cannot exceed more that 2%. This means you can only really charge AT MOST 2% YoY on the entire value of the fund. That 2% will have to cover your entire expenses (salary, insurance, office space). This means most operations have to be extremely lean as there isn't much money to spread around. |