Thanks, Nick. I think these are poor products but don’t think they’re a ponzi. They’re reporting their losses and returning capital. It does have a spinning plates feeling to it where perf/yield begets flow which begets return of capital that is mistaken for yield which begets more flows and so forth. But I don’t think people are being literally defrauded.
That's fair. It's just a terrible product, not fraud. The way that yield is reported is pretty creative but as you say, if you read the docs, it is disclosed.
That can certainly happen but I don't know that it has a bearing on performance necessarily. In a way, it could somewhat alleviate pressure to return capital (as I think there's a kind of procyclicality to it and so if you had outflows maybe they're returning less capital).
Amazing. I'm pretty sure there's a term for a fund that uses new investment inflows to pay out obligations to existing investors.
Thanks, Nick. I think these are poor products but don’t think they’re a ponzi. They’re reporting their losses and returning capital. It does have a spinning plates feeling to it where perf/yield begets flow which begets return of capital that is mistaken for yield which begets more flows and so forth. But I don’t think people are being literally defrauded.
That's fair. It's just a terrible product, not fraud. The way that yield is reported is pretty creative but as you say, if you read the docs, it is disclosed.
but doesn't it have to end at some point, where the outflow outpaces the in? No different than Social Security.
That can certainly happen but I don't know that it has a bearing on performance necessarily. In a way, it could somewhat alleviate pressure to return capital (as I think there's a kind of procyclicality to it and so if you had outflows maybe they're returning less capital).