In this episode of Retire with Style, Wade Pfau and Alex Murguia explore the complex world of hedge funds, focusing on strategies like global macro, event-driven, and managed futures. They explain the role of derivatives, the impact of forecasting, and how these approaches can complement a broader investment portfolio, especially in the context of retirement planning.

Takeaways

• Derivatives are contracts whose value depends on an underlying asset.
• Global macro strategies rely on macroeconomic trends and require strong forecasting skills.
• Event-driven strategies aim to profit from corporate actions such as mergers and acquisitions.
• Managed futures use trend-following techniques to trade commodities, currencies, and other assets.
• Understanding the distinction between futures and options is essential for informed investing.
• Hedge funds typically require accredited investor status due to their complexity and risk profile.
• Hedge fund performance can vary widely depending on market conditions and strategy selection.
• Managed futures often have low correlation with traditional stock and bond markets, offering diversification benefits.
• Investors should evaluate how hedge fund strategies align with their broader investment objectives.

Chapters

00:00 Introduction to Hedge Funds and Market Trends 02:34 Understanding Derivatives in Investing 10:14 Exploring Global Macro Strategies 20:29 Diving into Event-Driven Strategies 30:36 Managed Futures: Trend Following Approaches 40:05 Conclusion and Future Discussions

Links

Explore the New RetireWithStyle.com! We’ve launched a brand-new home for the podcast! Visit RetireWithStyle.com to catch up on all our latest episodes, explore topics by category, and send us your questions or ideas for future episodes. If there’s something you’ve been wondering about retirement, we want to hear it!

Join Us Live on YouTube – June 2nd at 2PM ET! Want to go beyond the podcast and be part of the conversation in real time? Wade and Alex will be hosting a special Retire With Style YouTube Live session, where you can ask your retirement questions and get answers on the spot.

Head over to our YouTube channel now, hit Subscribe, and click the bell to get notified when we go live. We’ll see you there! https://www.youtube.com/@retirewithstylepodcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2025! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

In this episode, Wade and Alex explore the world of hedge funds—what they are, how they’re structured, and how they’ve evolved from simple hedging tools into complex investment vehicles. They break down common fee models, challenges in measuring performance, and the impact of data biases. The conversation also covers key hedge fund strategies—including long-short, market neutral, arbitrage, and quantitative approaches—highlighting their mechanics, risk profiles, and what they mean for investors, particularly those nearing retirement. Listen now to learn more!

Takeaways

• Hedge funds are actively managed investment vehicles with fewer regulatory constraints.
• They aim for absolute returns, regardless of market direction.
• The traditional fee model is “2 and 20”—2% management fee and 20% of profits.
• Fees are declining due to growing competition and investor scrutiny.
• Performance is difficult to assess due to survivorship bias and data limitations.
• Investors should be cautious of marketing claims and understand the fund’s true strategy.
• Long-short strategies bet on both rising and falling stocks.
• Market neutral strategies attempt to remove market exposure to focus on relative performance.
• Arbitrage seeks to profit from temporary price inefficiencies.
• Quantitative strategies rely on data-driven models to guide trades.
• Risk premium harvesting involves tilting toward factors like value or momentum.
• Short selling helps with price discovery but carries risk due to unlimited loss potential.
• Understanding alpha (excess return) and beta (market exposure) is key to evaluating hedge fund performance.
• Technology is central to many modern trading strategies.
• Informed investors are better positioned to navigate complex alternatives like hedge funds.

Chapters

00:00 Introduction to Hedge Funds 02:12 Understanding Hedge Funds 05:30 Fee Structures and Costs 10:00 Performance and Survivorship Bias 16:08 Hedge Fund Strategies Overview 22:43 Long-Short and Market Neutral Strategies 23:40 Understanding Long-Short Strategies 30:10 Exploring Market Neutral Strategies 38:11 Diving into Arbitrage and Quantitative Strategies

Links

Join Us Live on YouTube – June 2nd at 2PM ET! Want to go beyond the podcast and be part of the conversation in real time? Wade and Alex will be hosting a special Retire With Style YouTube Live session, where you can ask your retirement questions and get answers on the spot.

Head over to our YouTube channel now, hit Subscribe, and click the bell to get notified when we go live. We’ll see you there! https://www.youtube.com/@retirewithstylepodcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2025! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

In this episode of Retire with Style, Dr. Wade Pfau and Dr. Alex Murguia explore the evolving world of alternative investments and their potential role in retirement planning. They discuss the concept of "Winning the Loser’s Game"—emphasizing the value of steady, disciplined strategies over high-risk maneuvers—and examine how alternatives like cryptocurrencies, private equity, and hedge funds may fit into a well-structured retirement portfolio. The conversation covers what it means to be an accredited investor, common misconceptions about alternative assets, and the importance of liquidity and regulatory oversight. They also touch on how current market dynamics are making these investments more accessible to individuals. Plus, they answer a listener question about spousal benefits under Social Security, offering practical guidance for those planning around them. Listen now to learn more!

Takeaways

• Alternative investments can enhance portfolio diversification.
• The concept of 'Winning the Loser's Game' applies to investing strategies.
• Community engagement can be fostered through shared interests like pickleball.
• Understanding the role of alternative investments is crucial for informed decision-making.
• Not all alternatives are suitable for every investor's portfolio.
• The definition of alternatives is broad and includes various asset classes.
• Investors should be cautious of the hype surrounding alternatives.
• Higher returns are often touted as a benefit of alternative investments.
• Inflation hedging is a key reason for considering alternatives.
• Access to alternative investments is becoming more democratized. Cryptocurrencies, especially Bitcoin, are seen as alternatives to traditional assets.
• The future of investing is evolving, with more access for household investors.
• Accredited investor status is crucial for accessing certain investment opportunities.
• Many misconceptions exist about the risk and accessibility of alternative investments.
• Liquidity versus illiquidity is a key consideration in alternative investments.
• Market dynamics are changing, making alternatives more relevant now.
• Technological innovations are democratizing access to alternative investments.
• Investors should assess their portfolios for potential returns in alternatives.
• Regulatory oversight is important for ensuring the safety of investments.
• Understanding Social Security benefits is essential for retirement planning.

Chapters

00:00 Introduction to Alternative Investments 02:57 The Concept of Winning the Loser's Game 06:09 Engaging the Community with Pickleball 08:58 Understanding Alternative Investments 12:05 Defining Alternatives in Investing 15:03 The Appeal of Alternative Investments 19:33 Exploring Cryptocurrencies and Their Unique Position 22:01 The Evolution of Alternative Investments for Household Investors 24:40 Understanding Accredited Investor Status and Its Implications 31:07 Debunking Myths About Alternative Investments 41:07 Why Now is the Time to Consider Alternatives 45:17 Listener Question: Social Security Spousal Benefits

Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2025! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips