You could swap out VC funds with hedge funds and the article would pretty much be the same.
Which is only a percentage of funds under management. The hedge fund industry invests in wildly diverse sectors, securities etc. VC'S can be treated as just another hedge fund sector.
If you can't get basic facts right (e.g.: lockups are not ~2 year - corrected by mdda), it is difficult to pay any attention to your opinions.
The other major problems arising out of "black box" investing also applies to hedge funds.
That shows the diversity of strategies (although not funds managed per investment category). "The SEC started regulating funds with less than a two year lockup" I.e. a pecularity to the US.
That survey isn't particularly good data. For one thing, it conflates Fund of Funds with other hedge funds, which is pretty questionable given that they're really a separate class with different fee and performance expectations.
DeutscheBank is a bunch of kids and that particular report is questionable??? I hope you don't work in funds management.
> Effectively, SEC regulations like Dodd-Frank impact large funds worldwide, because you're subject to them if you have more than a small number of US investors. (I think it's 15.)
See http://www.google.com/?q=master+feeder. Hedge funds that want to accept money from US and EU investors are structured to avoid the US regulations for the EU investors (for many more reasons than lock-up periods - e.g. look at the graphs of lockup periods broken down by investor country???!).
It is almost the defining feature of hedge funds that every fund is different. A hedge fund is defined by the class of investor it aims at (institutional and/or qualified investors) - everything else is variable - hedge funds are diverse in almost all other dimensions (although some things are common e.g. 2 and 20).
Returning back to the original point:
"You could swap out VC funds with hedge funds and the article would pretty much be the same."
Very true. The variation within the hedge fund industry is more than the variation between a VC fund and any average hedge fund. IMHO 90% of the article applies to hedge fund investors. The issues of the 2% management fee, the human factors of the fund managers, and the issues to do with transparency (black box) are all relevant to many hedge funds.
The only reason I am answering you is because I hate seeing the standard misconceptions about hedge funds being promulgated.
The percentage of hedge funds fund invested in illiquid investments is generally small... that's something you'd see a PE fund do (buying private companies) but in most cases, a hedge fund does not want to buy something they can't sell with a phone call. Probably the closest would be the distressed guys who might buy untradeable bonds in the hopes of converting or getting a workout.
My point was they don't (generally) have the ~7 year effective lockups associated with VC funds, where there's a staged calldown over the first 2-3 years and then you get paid back (hopefully) starting with year 5 or so.
However, many hedgefunds have the concept of 'gating' - where if everyone rushes for the door at the same time, the fund can restrict outflows. This is to let them to unwind illiquid investments without causing market disruption (to enable them to treat the people leaving on a fair basis as the people who stay : The portfolio doesn't have to just sell off the liquid positions to satisfy cash withdrawals, leaving tougher ones behind).