So Many Options, So Little Money...

So I've done a fair amount of research, and there seem to be basically three ways to set up a fund. Two of them are very very expensive.

Mutual Funds

Mutual Funds are subject to a lot of regulation. Not to mention the rules to running the fund. For instance, mutual funds cannot have a 20% position in a single stock. They are registered with the S.E.C., which is an expensive ongoing cost. Mutual fund fees are carefully regulated, and the market is flooded. Frankly, who the hell wants to report to the government on an ongoing basis? The Investment Act of 1944 is probably the best intentioned piece of legislation the finance world has. It's intentions are soooo good, and yet, somehow, it's managed to put all the money at the top and give none of it to me. Way to go government.

Managed Accounts

Another expensive, heavily regulated path to take, managed accounts allow for a much greater allocation freedom with all the burdens of a mutual fund. The trade off is the selling minimums are typically higher, and the accounting costs eat into investor profits in a massive way. There is no accredited regulation, though, so average joes can buy this if they can afford the minimums. I've considered this carefully, since I think my demographic is farmer's market shopping hipster yuppies ages 25 to 40. Sort of like a sitcom. The problem is cost: I'm broke. So, I'm left with the cheapest option with the most freedom.

Hedge Funds

Hedge Funds are basically investment manager playgrounds. Most managers use high amounts of leverage, complicated math and/or "black box" magic to invest in vast combinations of assets in a vast amount of markets all over the globe. They do this because hedge funds are virtually unregulated money making machines.

Unregulated you say? Well, sort of regulated.

For instance, as a hedge fund, I cannot advertise. To anyone. Ever. Now that's a restriction that's tough to beat. So instead, everyone just does it behind the SEC's back. I know, I was a financial adviser professionally. Fund managers all advertise in covert ways - like "leaks" and "broker dealer only" material. Handing out a leaflet that is designed for a client but says broker dealer only and offering a sales trail of 2%+ per year, and you don't think the advisers and B/D's have a conflict of interest?

Money making machine you say? Well, they make money for someone at least.

Only they don't necessarily make the investor money, they usually make themselves and their brokers a killing in management and brokerage fees. Honestly, it's ugly. You have to wonder what, exactly, does that 0.25% annual "administrative" fee go towards? Especially in funds with over $500M under management. That's $1.25M in administration!!! Maybe they give a break to institutions, but on the retail side, even the millionaires get screwed. I guess morally it does feel better to take ridiculous fees from monocle wearing millionaires with pink poodles riding Falabella horses.

Even though it can be a sleazy world, unregulated means one thing to me: cheap entry.