TIME – Much attention has been paid lately to Goldman Sachs’ decision to “help” average folks (a.k.a. the 99% crowd) access the kind of high-stakes hedge funds once available only to the superrich (a.k.a. the 1%). And while all sorts of pundits and investor advocates have noted the folly of this and similar ideas, there’s a case to be made that the opposite is true — that average investors might do well by throwing some money Goldman’s way. In fact, there are two cases to be made. Allow me to explain.
But first, let us stipulate that investing in this and most other hedge funds as they operate today is a really dumb idea — not just for regular Joes but for pretty much everybody else too. Why? Because hedge funds, which were once a way for the very rich to cushion their fortunes against falling assets prices (thus the word hedge), have essentially become a way for their owner-operators to make tons of money from management fees and profit sharing while their investors get soaked trying to outperform the investing masses. (This development would get the hashtags #RichWorldProblem and #WhoReallyCares were it not for the fact that a lot of pension funds and college endowments are hedge-fund clients. But that’s for another column.)
