Women have a long way to go on Wall Street, and nowhere is this more true than in the hedge fund industry, where only 15% of CEOs are women. 

While women often hold marketing and compliance roles, they are rare in investing positions, which usually pay the most.

There are a lot of reasons for the gap, among them biases, cliquey hiring, and weaker professional networks.

Last year, I spoke with female investors about what it is like working in the industry. We're republishing their stories in honor of International Women's Day on March 8.

Some spoke of annoying biases — one woman who launched her own fund said she stopped wearing her wedding ring at investor meetings because she grew tired of questions about what her husband did. Others spoke of being ignored for the investment ideas they presented or hearing crass talk about female colleagues.

Most said their experiences had, on the whole, been otherwise positive. Investing proves a quantifiable measure on which to be measured, something other careers lack, some mentioned. There are fewer gray areas on which to be measured, the thinking goes, if you can point to a number that proves your performance for the year.

Everyone asked to be kept anonymous so to not jeopardize their careers. Here are their stories.

SEE ALSO: Something is missing from the hedge fund industry

"There's a general theme of being discounted"— Investor on an all-male investment team

"I have developed a lot of thick skin. It's not uncommon when we discuss an investment idea, I'll raise my hand, the question will be dismissed, and then a [male] colleague will ask the same question and there will be a 30-minute conversation."

"When I travel, when I'm in boardrooms, people will direct questions to my [male] boss and not me, even though I presented ... There's a general theme of being discounted almost or doubted and a general assumption of 'she must be the IR [investor relations rep].'"

"It's a delicate line. I want to be treated equally and be one of the boys. Sometimes they say lewd comments and it goes in one ear and out the other. I want it to be a natural environment where they feel they can speak freely." 

"There’s a certain approach to conversation that comes out of knowing what is expected in a conversation"— Investor who studied engineering

"I've always operated in an environment where the distribution was highly skewed ... There's a certain approach to conversation that comes out of knowing what is expected in a conversation. Sticking to a need to say basis. Speak about what's relevant. The content matters ... being to the point."

"If you're in the minority, being the only woman on the team, your voice is heard more. I think of it like a parent with 10 kids and you think you have an underdog in the family. You think you need to call out the weakest link, the quietest child so you can hear what the quietest child has to say ... The fact that you are the only one on the team makes you more visible in many ways. And the reason you made the team is because you met certain criteria and you deserve to be on the team. And you have a level of credibility that you get to be heard, and amplified."

"He was surprised I wasn't pitching a more 'girly' name"— Hedge fund analyst

"It has always been a more uncomfortable game of numbers where the ratio of male to females in any event is 10 to one and the men huddle together and the women are sort of separated. In one instance, I was meeting with an analyst from a hedge fund in the city and he asked whether I had any names I could pitch him. I began to talk about a semiconductor company when he interrupted to say he was surprised I wasn't pitching a more 'girly' name." 

Deutsche Bank just came out with its annual survey on the state of the hedge fund industry. Among the findings: for the past three years, investors in hedge funds haven't been getting close to the returns they expected.

It wasn't always this way. In 2013, investors in hedge funds targeted a 9.2% return and got 9.3% – close to spot on. But that flipped in reverse the next year. The gap between what investors wanted and what they actually got has since widened.

In 2014, investors expected returns of 8.1%, but they got 5.3%.  In 2015, they wanted 7.5% and got 3%. Last year was much of the same.

Despite the mismatch between expectations and reality, Deustche Bank thinks investors will keep their money in funds.

"We think that flows will remain flat in 2017," Marlin Naidoo, the bank's head of capital introduction, told Business Insider in a phone interview. "We think it’s a testament to investors remaining committed to the industry at the back of last year." 

Some investors that the bank surveyed (31%) plan to up how much they invest in hedge funds, while the majority (52%) plan to keep their allocations the same.

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Folger Hill Asset Management, a hedge fund backed by Leucadia, has suffered another blow. 

Rayne Gaisford, the director of risk management, left in recent weeks and plans to work in consulting, according to people familiar with the situation. 

Gaisford's departure marks at least the third in recent weeks at a senior level. The others are portfolio managers Mitul Shah and Jennifer Pollak, Business Insider previously reported.

Folger Hill has been struggling for some time. Last year, the fund fell -17.5% percent (compared to a 12% gain in the S&P 500).

In a January investor letter, the firm's founder, Sol Kumin, said the fund would do better this year.

The firm's flagship fund has returned 0.56% through the end of February, investor documents show. That's compared to a 6% rise in the S&P 500 over the same period.

The hedge fund has not regained the assets it managed just eight months ago, when it oversaw about $1 billion, according to the Hedge Fund Intelligence Billion Dollar Club ranking.

Folger Hill's backer, Leucadia, has been seeking a cash infusion since last year and has not found a partner, people familiar with the situation said. Folger Hill lost at least a third of its assets last year from the firm's 2015 peak, Reuters reported.

Kumin launched Folger Hill in 2014 and previously was billionaire Steve Cohen's chief operating officer at SAC Capital Advisors, which closed following an insider trading scandal.

A spokesman for Folger Hill declined to comment.

SEE ALSO: The $2.5 trillion investor behind a statue of a girl on Wall Street is tackling its own gender problem

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Bill Ackman just announced that he has sold out of his hedge fund's Valeant stock holding, a position that has cost the fund dearly.

Ackman's firm, Pershing Square Capital, invested in Valeant two years ago. Later that year, the drugmaker started to run into a spate of problems that wiped more than 90% off of its market value. Reuters estimated that the investment caused Ackman to suffer roughly $3 billion in losses. 

Pershing Square isn't the only hedge fund that had made a big bet on the stock. Jeff Ubben's ValueAct and John Paulson also have big stakes. Ackman has been the most outspoken of the hedge fund managers, though.

Here's how Pershing Square has done in the years since investing in Valeant, based on data from the firm's publicly traded vehicle, which serves as a proxy for its flagship hedge fund. We've compared those numbers to Valeant's and the S&P500's performance.

SEE ALSO: Bill Ackman is selling his entire stake in Valeant Pharmaceuticals

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Valeant's stock is down around 9%, sliding on the news that investor Bill Ackman's hedge fund, Pershing Square, is unloading its entire stake in the company.

This ends a three-year involvement with the company for Ackman. During that time, Valeant's stock price fell from a high of about $279 in the summer of 2015, to where it sits under $11 today.

The company became the subject of several federal investigations, including one involving a secret pharmacy that it used to operate which is now be accused of insurance fraud. 

And it was pressured to hire a new CEO while its executives were repeatedly called to Washington for Congressional hearings to answer for drug price increases.

It was quite a ride.

SEE ALSO: Bill Ackman pinpointed the moment he should've sold out of Valeant — and he's wrong

SEE ALSO: 

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A $5.5 billion hedge fund is making a killing by stepping in to an area of business that European banks are pulling out of.

Chenavari Investment Managers, a London-based hedge fund firm, says it is one of the main players buying loans from European banks.

Those loans fund European businesses. After the financial crisis, European banks were forced to downsize their balance sheets and reduce lending. That has created a gap for asset managers to exploit.

With that in mind, Chenavari launched a private credit European bank deleveraging fund in 2011. The annualized performance of the fund stands at 11% net since its inception, with no down year. The firm has $1.8 billion in closed-ended private credit illiquid funds.

"We currently think that the best opportunities arise because of the changing European bank business model," Loic Fery, the firm's CEO, said in an email. "What happened in the US twenty five years ago with the development of specialty finance boutiques on credit asset classes in each state is now happening in Europe. European countries are transitioning from a bank-financed to an alternative lenders financed economy."

Fery added that his hedge fund was "acquiring private debt portfolios held on banks' balance sheets and also originating new loans in sectors that banks tend to retrench from."

Fery told Business Insider:

"We also see strong value in the less liquid part of the European credit market, either through bank portfolio acquisitions or direct private debt new origination. When it comes to illiquid credit strategies, we are convinced that we will witness a continued flow of attractive investment opportunities deriving from European banks deleveraging, regulatory changes and central bank distortions. Retreat of traditional lenders and market-makers is obvious in various specialty finance markets (real estate debt, trade finance, consumer finance, leasing), leaving a room of choice for alternative lenders like Chenavari."

SEE ALSO: Meet the 8 hedge fund managers who made the most money in 2016

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A quick note on Valeant Pharmaceutical short sellers from Wall Street analytics firm, S3 Partners– something to give a little context to hedge fund billionaire Bill Ackman's exit from the company.

"VRX short sellers were profitable every year after Bill Ackman’s entry into the stock, eventually earning a 343.45% return on their average short position of $801 million," the firm said in a note to clients.

You'll recall that Bill Ackman started buying Valeant stock after collaborating with the company on a failed hostile takeover of Allergan. Months later, in March of 2015, Ackman started investing in Valeant, which at the time cost around $140.

It would climb to a high of $257 that summer before plummeting over 90% to where it sits today at $11.

Short sellers were there every step of the way. Jim Chanos, founder of Kynikos Associates, announced that he was short the company in 2014, saying that it was a rollup — company with no organic growth that required acquisitions to survive.

Another short seller, Andrew Left, contributed to Valeant's precipitous fall in October of 2015 by publishing a report calling into question whether or not Valeant was the next Enron.

More from S3:

Short sellers may start exiting their positions with Pershing Square’s stock sales already having pushed VRX’s stock price to year-to-date lows. But they might be waiting for the other shoe to drop, with the possibility that John Paulson, of Paulson & Co, will sell his 19.4 million share stake in VRX after Bill Ackman’s recent exit. With short interest at $572 million, and falling, each $1 drop in VRX’s stock price equates to approximately $50 million in profit.

That considered, now might be time to take some off the table.

Or you might take into consideration that despite the fact that even though Valeant beat Wall Street's expectations in its most recent earnings announcement, the stock fell 6% because guidance was weak. The company is looking to refinance its $30 billion in debt and needs to sell assets to make payments, and analysts worry that those sales could cut into the company's revenue.

So maybe you leave it on the table.

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Dan Loeb's Third Point is looking to raise fresh money. 

The fund opened to new money around six months ago, according to people familiar with the matter. The minimum investment is $10 million for those investing directly. 

Around the same time, it joined Morgan Stanley's wealth management platform, allowing the bank's wealthy clients to invest smaller amounts in Third Point. Investments via Morgan Stanley start at $250,000, according to people familiar with the details.

Third Point infrequently opens to fresh money. The last time the fund opened, in 2014, it raised $2.5 billion in just a matter of weeks, according to reports at the time. 

It's not clear how much Third Point has raised in the past six months. The fund, one of the industry's most tracked, managed $14.9 billion as of midyear 2016, according to the Hedge Fund Intelligence Billion Dollar Club ranking.

Third Point's main hedge fund gained 6.1% in 2016, a performance Loeb described as "disappointing." However, Loeb said in a February letter to investors that he was betting on a better environment for investors under President Trump.

In particular, he highlighted a focus on banks. Loeb put on a big bet on Wall Street in the fourth quarter of 2016, with a February 10 regulatory filing showing that Loeb's Third Point took large positions in JPMorgan and Bank of America and, to a lesser extent, Goldman Sachs — investing nearly $1 billion in total in the banks' shares.

Third Point's offshore hedge fund was up 2.6% in January, according to Reuters. 

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Whenever someone compliments hedge fund manager Loic Fery on his fund's performance, he has the same response.

"I always invite them to meet in another 10 years to reconsider," Fery, the CEO of $5.5 billion fund Chenavari Investment Managers, said in an email to Business Insider. "We cannot take anything for granted in our industry."

It's a mantra that many fund managers could probably heed.

Many hedge funds fail to live up to their promises to investors. The $3 trillion industry shrunk by about $70 billion last year, the biggest drop since 2009, according to data tracker HFR. Many funds have underperformed, leaving investors with high bills but little payout. In some cases, big investors like public pensions have reacted by moving their investments.

Several top-earning hedge fund managers last year, who also happen to run some of the biggest funds, earned payouts in the hundreds of millions and billions, despite running funds that didn't beat the S&P 500.

Chenavari said the annualized performance of its multi-strategy flagship hedge fund is 7.6% net since its inception five years ago. The firm's private credit European bank deleveraging fund returned 11% net since its inception in 2011.

Given the fund's performance, Chenavari could potentially have raised more funds to invest. But Fery said he's opposed to the notion of asset gathering in the industry, which some investors in hedge funds see as detrimental to performance and unfair.

"Many great investors have inspired me in pursuing that ambition to manage an investment firm focused on performance, as opposed to asset gathering," Fery said in the email. "In particular, I have always highly regarded Warren Buffett for his long term view and his investment approach."

"I am more impressed by high annualized returns over a long period of time than by those who are remembered as posting a one year amazing performance home run," he added. 

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Some hedge funders are optimistic about what President Donald Trump can do for their industry.

At the Absolute Return Symposium on Thursday, four out of the five hedge fund executives polled on a panel said they thought the president was good for business. The fifth declined to say.

Some of the panelists said they believed hedge funds were overregulated and were hopeful the new administration would pare policing efforts.

Chris Hardy, the chief compliance officer at Whitebox Advisors, which paid a $1.2 million settlement in 2014 after the Securities and Exchange Commission investigated the firm on suspicion of illegal short selling, said he was hopeful that the agency would pull away from its so-called broken-windows approach.

Hardy described the strategy as "investigating managers and holding them accountable for pretty minor infractions in a really significant way."

"It's the theory that if you take out the small stuff," he said, "the big stuff will take care of itself."

"Hopefully we'll see some pullback from that," Hardy told an audience of Wall Streeters at a tony conference center overlooking Central Park.

Last year, the SEC issued a record number of sanctions, most likely a result of the agency enforcing more minor cases, according to a Wall Street Journal report from the time.

Hedge fund execs often say complying with regulations is costly, and Hardy brought that point up at the panel. He cited a document that managers must file with regulators called the Form PF.

"Strengthening the corporate culture within a firm is always a positive thing, but you take ridiculous things like Form PF — there are no regulators here I'm hoping," Hardy said.

"There were so many promises about what it was meant to do, and it hasn't even gotten close to doing that," he added. "I have significant doubts they're even taking the data and analyzing it in any meaningful way. The amount of money that firms have had to drop in to find solutions to problems like that to me is a fairly ridiculous thing."

Trump has picked Jay Clayton, a longtime partner at the law firm Sullivan & Cromwell, to head the SEC. Clayton is known for his ties to the hedge fund industry, and he has previously represented hedge fund managers like Bill Ackman and Paul Tudor Jones, The New York Times reported.

Another hedge funder on the panel, Patrick Kelly, the cofounder of Brigade Capital Management, said he was "encouraged" by the Trump administration's ties.

"The last eight years, we've had a situation where they were assuming that you maybe weren't as legit as you lived your life to be," Kelly said. "I'm encouraged by the commercial nature of the people there, who understand that the mortgage crisis was maybe not caused by the things you read about in the paper, and there were other things behind it."

"If we get back to a business isn't bad approach, I think it benefits everybody," he added.

Brigade managed $4.5 billion in hedge fund assets as of midyear 2016, according to the HFI Billion Dollar Club ranking. Whitebox managed $4.2 billion.

Richard Shapiro, a partner at the $3 billion Wexford Capital, and Andrew Rabinowitz, the president of the $13 billion Marathon Asset Management, also participated in the panel. Both said they thought Trump was good for the hedge fund business.

The fifth panelist was Alec Litowitz, the founder of the $13.5 billion Magnetar Capital. Following the financial crisis, the SEC investigated Magnetar for more than a year after the fund created risky deals betting on the mortgage crisis that lost billions of dollars. Magnetar wasn't charged with wrongdoing.

Asked whether he thought Trump was good for the hedge fund industry, Litowitz declined to say.

"I haven't seen his last tweet, so I don't know," he said, drawing laughs from the audience.

SEE ALSO: $13 BILLION FUND: Hedge funds have a PR problem

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The hedge fund industry would be more likable if only better PR teams managed their outreach, says an exec at one of the industry's top funds.

"Hedge funds should hire the same PR firm that private equity firms did because private equity has completely nailed it on the PR perspective,"Andrew Rabinowitz, president of $13 billion Marathon Asset Management, said on a panel at the Absolute Return Symposium in New York on March 16.

He also said that hedge funders' philanthropy goes underreported by the press.

"I started an endowment and we donate to children's hospitals," Rabinowitz said. "Three weeks ago ... we won a presidential citation for one of the programs we did for the children’s hospital. You know how much press covered that? Zero."

Financial media does occasionally cover charity events. The hedge fund industry employs plenty of PR people, mostly at external agencies, whose press releases about said charity events fill up reporters' inboxes. 

"Now, if I left Marathon or got fired from Marathon, you know how many people would cover that?" Rabinowitz asked the crowd. "Probably more than zero."

SEE ALSO: Dan Loeb's Third Point is looking to win fresh money

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It was supposed to be the age of the asset owner. 

Post-financial crisis, the investment banks that had once ruled finance were brought to their knees, and the asset managers suddenly had all the power.

Banks started retreating from certain business lines, with hedge funds and private equity firms stepping in. Big bank traders and research analysts jumped to the buy side. 

Well, according to Morgan Stanley and Oliver Wyman, the world might be beginning to shift back towards banks. 

"Our new work suggests that in a reversal of fortunes Asset Managers now face intensifying top-line pressures from cheap beta and regulations, while Banks are primed for upside with regulatory shifts helping to drive RoE up by ~300bps," the two said in their annual blue paper on the state of the finance industry, titled "The World Turned Upside Down."

The report said: 

"We see a reversal of fortunes for Wholesale Banks and Asset Managers. The effects of Quantitative Easing (QE) and bank regulation drove a more than $100BN divergence in revenues since 2011, with Asset Managers up $65BN and Wholesale Banks down $45BN. This now looks set to go into reverse."

With that in mind, Morgan Stanley has slashed earnings per share estimates for 2019 and 2021 for asset managers by double digit percentages. It also boosted 2021 EPS estimates for US banks, with a median increase of 7%.

Asset management pressures

For the fund management, it's all about fee pressure. The rise of passive management has led to widespread decreases in fees. The assumption that the top funds can charge higher fees is under attack, according to Morgan Stanley and Wyman. In other words, the cheapest fund wins.  

According to the reports, "Demand for Asset Management product is increasingly price elastic, not performance elastic – the correlation between performance and flows is breaking down." 

The report said: 

"Forecast ~5% pa global industry asset growth will not offset 10-15% fee compression in combination with further shift from active to passive resulting in global industry revenues flat to down 2016-2019. Fee rates could drop by 25-50% on lower returns in our bear case."

Big banks are back

On the other side of the sell-side, buy-side divide, investment banks are back in business. Fixed income, currencies and commodities revenue rebounded in 2016, and the prospect of deregulation on Wall Street has sent bank stocks soaring. 

The report said:

"For the first time in our Blue Paper series, we are looking for structural balance sheet growth, pinning 2016 as the low point of regulatory deleveraging. Wholesale banks have been on an intensive diet since 2011, as aggregate balance sheets shrank by a third. But now, a desire for higher quality growth has been instrumental in turning the tide of global politics."

It added:

"Regulation tempering expected to be most impactful in the US as new regulatory agency heads do not need Congress to legislate changes in the underlying Dodd-Frank Act to improve efficiency of capital and liquidity rules. This will help unlock the $83 billion in excess capital that the US moneycenter banks hold over the next five years. US Wholesale Banks will have increasing capacity to lend, trade and invest, supporting growth in the wholesale banking wallet."

Morgan Stanley and Wyman forecast that the return on equity for wholesale banking divisions will rise three percentage points in the next three years, with return on equity rising above the cost of equity for the first time since the financial crisis.

In Main Street language, that means banks are going to start generating attractive returns again after a decade of brutal cost-cutting and downsizing. 

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One of the biggest hedge fund launches in recent memory is planning to double its investment team and more than double its assets.

UK-based Rokos Capital Management, which makes macroeconomic bets, is looking to grow its number of portfolio managers to 10 from five in a gradual expansion, people familiar with the matter said.

The people requested anonymity because the information wasn't public.

The expansion would allow the fund to eventually manage as much as $15 billion, more than double the roughly $6.7 billion that the firm now manages, the people said.

Chris Rokos was previously a partner and star trader at Brevan Howard Asset Management, a Europe-based hedge fund titan that has struggled to retain assets over the past few years on the back of underperformance. Rokos launched his fund in 2015 after suing Brevan to exit a partnership agreement that was set up to prevent him from launching a fund for five years, according to a Financial Times report.

Adding assets and portfolio managers would mean that Rokos would eventually scale back the percentage of assets he personally manages. He now manages the bulk of the money, the people said.

Rokos raised about $2.2 billion earlier this year in a quick capital raise, the people added. The fund has since technically closed to new money but is expected to open again at some point in the future, one of the people said.

Investors can opt to pay a 1% management fee and a 30% performance fee or a 2% management fee and a 20% performance fee, the person added.

The fund returned about 20% last year, making it one of the industry's top performers, Bloomberg reported earlier this year. Performance this year, however, is down about 2% through the end of February, according to one of the people.

SEE ALSO: 'I think it benefits everybody': Hedge fund managers are cheering Trump

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A $1.4 billion hedge fund expects a new wave of tech M&A, particularly in software, as new kinds of buyers come to the fore.

"The types of companies looking to acquire software businesses have expanded well beyond ... traditional acquirers" like private equity firms and Oracle and IBM, Praesidium Investment Management wrote in a letter to clients last week.  

Enterprise software makes up 40% of the fund's portfolio, according to the letter.

"We believe that we are now in the early part of a major M&A wave that will be more intense than any period in the past," Praesidium's Kevin Oram and Peter Uddo wrote in the note. A copy was reviewed by Business Insider.

The deals can be a boon for the buying companies. According to New York-based Praesidium, that's because "the acquirer in most software transactions can normally cut 40-60% of the operating costs of the companies they acquire in a relatively short period of time."

Here's more from Praesidium's letter on the shift taking place:

"Technology companies like, Cisco, Google, and even Microsoft, who didn’t buy many enterprise software companies in the past, are also now aggressively bidding for software assets. Further, major industrial companies, like GE, Siemens, and Honeywell see a significant opportunity to sell software that their customers are increasingly using to control, monitor, analyze, and service the industrial equipment these companies provide. These industrial firms recognize the value they can create in their own businesses by developing high-margin, recurring software-driven cash flow streams from their huge installed bases of equipment. As a result, they are all allocating tremendous amounts of capital towards software acquisitions and internal investments."

The fund returned 17.6% net of fees last year compared to a 11.9% gain in the S&P 500, including dividends, according to the letter. This year, the fund was up 3.8% net of fees through February and currently manages about $1.4 billion firmwide, a person familiar with the matter said.

Praesidium isn't the only fund opining on the future of tech M&A. Samantha Greenberg's Margate Capital told clients earlier this year that it expected "hundreds of billions of dollars" in deals.

Bankers at Goldman Sachs also previously told Business Insider that they're having a record year for tech dealmaking.

SEE ALSO: A hotly-tipped hedge fund expects 'hundreds of billions of dollars' in tech deals

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Eton Park Capital Management is shutting down.

In a letter sent to investors on Thursday, founder Eric Mindich wrote:

"A combination of industry headwinds, a difficult market environment and, importantly, our own disappointing 2016 results have challenged our ability to continue to maintain the scale and scope we believe necessary to pursue our investment program consistent with our founding principles. ... We have made the very difficult decision to return your capital, from a position of relative strength."

A copy of the letter was reviewed by Business Insider.

Mindich, 49, said he plans to return 40% of all investors' capital by the end of April and that the fund's other investments would take longer to unwind over the "coming months," with some taking even longer. Partners and employees of the fund are the firm's largest investors, Mindich said.

Mindich's New York-based fund was considered one of the largest hedge fund launches when it started in 2004 with $3.5 billion. Mindich had worked at Goldman Sachs and is thought to be the youngest person to have made partner at the bank, doing so at 27.

The firm's flagship fund posted a 9.4% loss last year and assets shrunk from $9 billion to $7 billion, according to a January report by Institutional Investor's Stephen Taub.

News of the closure came as a shock to several people in the hedge fund community, including some investors. Some staff only found out about the closure today, according to people familiar with the matter.

The fund was facing limited redemptions this year, according to an investor briefed on the situation who declined to be named because they weren't authorized to speak publicly. While investment performance was weak last year, previous years had been strong, this investor said.

Investment performance was roughly flat for this year through mid-March, another person said.

Overall, hedge fund liquidations have outpaced launches, according to the data tracker HFR. More than 1,000 funds closed last year, while a little more than 700 launched. Last year, Perry Capital, another high-profile hedge fund, shut down following performance issues.

The New York Times earlier reported Eton Park would shut down.

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For many investors, hedge funds appear to be shrouded in mystery.

There’s a practical reason for this. The best hedge funds are extremely careful about protecting their ideas and tactics, because they provide an important competitive advantage for making profits. An example that illustrates the paranoia around this was described in Flash Boys by Michael Lewis, where he noted that at the ultra-secretive firm Citadel, it took five ID card swipes for an employee to simply start her day.

There’s also a psychological reason for the secrecy — which is that hedge funds want to appear incredibly complex and sophisticated, so that accredited investors will part with their money in order to get exposure to them. While hedge fund tactics are often intricate and extremely lucrative, understanding how they work is not as impenetrable as it may seem.

Hedge fund terms investors should know 

Today’s infographic comes to us from StocksToTrade, and it captures 48 terms that can serve as an entry point for any investor into the mysterious world of hedge funds.

It covers essential ideas around how hedge funds make their bets, such as arbitrage, hedging, pairs trading, alpha, and beta. The infographic also looks at hedge fund terms around measuring performance and risk, as well as words that describe fee structures and payouts.

Interestingly enough, we live during a time when modern technology has also allowed retail investors more access to these types of tactics than ever before. Take a look at this infographic on alternative investments, which gives examples of ETFs and mutual funds that mimic traditional hedge fund strategies such as long/short equity, merger arbitrage, or managed futures.

Want to learn more about how hedge funds work?

This post on WallStreetMojo outlines nine popular hedge fund strategies, or check out our favorite book on global macro investing: Inside the House of Money by Steven Drobny.

Courtesy of: Visual Capitalist

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Around midday on March 23, the news that a once vaunted hedge fund would close started rippling through New York's hedge fund community.

Eton Park Capital Management, a $7 billion hedge fund run by former Goldman Sachs wunderkind Eric Mindich, announced it would shutter. Performance had been disappointing the previous year, but strong before that. Mindich was well regarded. The fund was a significant size. Even some of the investors were shocked to hear of the shutdown.

In several ways, Eton Park's rise and closure symbolize a broader journey for the hedge fund industry.

When Mindich launched his New York-based fund in 2004, the industry was living large. Multibillion-dollar launches weren't uncommon. The broader industry was booming. Eton Park started with $3.5 billion, thought to be the largest hedge fund startup of its time. Newspapers that no longer exist covered the launch.

That year, the industry managed about $1 trillion and was on the road to tripling those assets over the next decade, according to the data tracker HFR.

More than 1,400 hedge funds launched that year, far outpacing the 300 or so closures, according to HFR. The next year was the industry's best, with more than 2,000 startups putting up a shingle.

Fast forward to now, and the tables have turned. Hedge fund closures have outpaced launches for the past two years. Performance overall has been lackluster, to put it kindly. Even the high-profile launches of yesteryear are struggling.

"It's not cool to invest in hedge funds anymore," said one startup hedge fund manager, speaking about wealthy families who traditionally backed launches. The manager, who requested anonymity, said family offices had been less interested.

It's not uncommon to hear hedge funders reminisce about the good old days before the financial crisis. That's because many are struggling to raise money or keep the capital they have. They're lowering their fees to investors, and it costs more now to run a business given increased compliance costs in the post-Bernie Madoff years.

Referring to hedge funds' traditional lucrative management and performance fees, Mark Doherty of the consulting firm PivotalPath said, "Even two or three years ago, you could start with two-and-20.

"Now you're lucky with one-and-something," he added.

The hedge funders who remain are enormously well paid, and there is little sympathy in most corners. Still, the new challenges have made the industry less lucrative and created more hurdles to get a fund off the ground.

For every story about a top manager launching with $1 billion, or a startup that got backing from idolized Wall Streeters like Dan Loeb, Louis Bacon, and Steve Cohen, dozens more funds are struggling to get up and running.

So what does it take to launch a fund? Business Insider asked a handful of new managers and consultants to get the lowdown on some areas to consider.

Raise capital, but not too fast

"Institutional investors want everything before they start: three-year track record, perfect operations, more than $100 million" in assets under management, said Keith O'Callaghan, chief operating officer at FQS Capital, which invests in new funds. "We're looking at a chicken-and-egg syndrome."

The key is to start with significant assets but keep growth tempered.

He added: "Ballooning [assets under management] over a short period of time is a warning sign for us that potentially the return profile could change. Some managers find it difficult to transition from running a $50 million to $500 million book."

Lots of money and a fancy pedigree

Opinions differ on how much a manager needs to start a fund — anywhere from $10 million to $250 million, though most hovered around $100 million. Those that start on the lower range can consider outsourcing back-office services. And some startups have been known to seek cheap rents at places like WeWork's coworking office space.

Keep in mind that compliance and regulatory costs are a "big line item," said one startup fund manager, who estimated the costs in the hundreds of thousands. "It would have been de minimus before Dodd-Frank," the manager said, referring to the landmark postcrisis regulatory rule.

Either way, investors say they expect managers to put up significant portions of their net worth into the fund.

"If I'm going to put my or my clients' money in it, I certainly need to know how invested you are," Doherty said. "You want to see an alignment of interests."

They're also expecting would-be managers to have spent time at investment firms with good reputations.

Long track record

New managers need at least a performance record of at least three years to show potential investors, O'Callaghan said. Some hedge funds don't let their traders take their performance sheets with them, so they might need to manage money on their own for a while to build up a fresh record.

Performance is only one piece of the puzzle, though. "Even an attractive track record doesn't mean we will invest," O'Callaghan said.

Patience and more time

"How quickly a hedge fund grows from a launch has been widened," Barsam Lakani, the head of prime services sales at Jefferies, told Business Insider.

"There is still evidence that investors will allocate to the right kind of launch. They're just not as frequent," he added. "They're taking a more cautious approach, they're doing more due diligence, more homework on any potential investment, and that's ultimately going to lead to fewer allocations to asset managers. ... Instead of it being a day-one process, it maybe becomes a six-month and 12-month process."

Flexibility

Managers should keep an open mind about how they want to build their business and the type of investor they want to attract, Lakani added.

"You don't necessarily have to comply with what people think are the norm," he said. "Whenever you're going to launch a fund, you need pedigree and track record, but the characteristic that you need today is that notion of flexibility."

For instance, managers might consider offering co-investments, which are essentially investment ideas that show up in the hedge fund but which investors can invest in separately. The startup manager who said wealthy families weren't interested in hedge funds said that offering co-investments was a way to entice them.

Discounts and creative fees

"It's no longer enough to offer discounted fees," Lakani said, adding that founders' share classes, which provide a discount for first investors, have become the norm.

Some managers, meanwhile, are experimenting with decreasing their management fees as assets increase.

Tempered expectations

Few launches start with a billion, let alone a couple hundred million, but that doesn't mean a fund won't eventually grow large. Lakani said he has known funds that launched with less than $20 million two or three years ago that are now managing north of $1 billion.

Be different

"People are looking for differentiation," said a New York-based manager who recently launched a fund. Startups need to pitch something that is unique, "whether it's a sector focus, derivatives that other people don't understand, some kind of specialized skill set," the manager said.

Get a fancy name — maybe

A recent study found that hedge fund names with gravitas, "defined as a combination of words from geopolitics and economics, or suggesting power," raised more money. But don't get too excited — "adding one more word with gravitas to the name of the average fund brings more than a quarter million dollars more in annual flows," the study said. In other words, it's peanuts in the world of hedge fund capital-raising.

The study also found a correlation between strong hedge fund names and negative investment performance.

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Hedge fund billionaire Bill Ackman is not known around Wall Street for his humility. But after riding Valeant Pharmaceutical's stock down from a peak of $279 in 2015, to around $11 this month, he has something to say to his investors.

"Clearly, our investment in Valeant was a huge mistake," he wrote in Pershing Square's 2016 annual letter.

"The highly acquisitive nature of Valeant’s business required flawless capital allocation and operational execution, and therefore, a larger than normal degree of reliance on management. In retrospect, we misjudged the prior management team and this contributed to our loss. We deeply regret this mistake, which has cost all of us a tremendous amount, and which has damaged the record of success of our firm. "

You'll recall that Valeant crashed in October of 2015 under the weight of scrutiny over its pricing practices and accusations of malfeasance from a short seller. That month, management also revealed that it was hiding a secret mail-order pharmacy within the company called Philidor — a pharmacy that is now being investigated for fraud.

You may also recall that, as early as 2014, investor Jim Chanos, the founder of hedge fund Kynikos Associates, was calling Valeant a rollup. That is to say, it was a company that needed a steady stream of acquisitions to show growth and survive.

Ackman denied that Valeant was a rollup throughout his years-long relationship with the company. But he sort of admits that he was wrong about that in his annual letter.

He says one of his mistakes was failing to understand how hard it is to keep a rollup going, essentially:

Management’s historic ability to deploy capital in acquisitions and earn high rates of return is not a sufficiently durable asset that one can assign material value to in assessing the intrinsic value of a business.

Ackman also said that he clearly made Valeant far too large a position in his portfolio, that any management team can make mistakes, and that a "large stock price decline can destroy substantial amounts of intrinsic value due to its effects on morale."

Tomato... tamahto

None of this acknowledges that he entered his relationship with the company by doing an incredibly risky deal that is now being evaluated by a California court. Ackman's first interactions with Valeant were in a joint attempt to buy Allergan, another pharmaceutical company. Ackman purchased Allergan shares in order to push the company to accept a merger with Valeant.

When that offer turned hostile and Allergan was ultimately sold to a white knight, Ackman made money anyway and even paid some of that to Valeant.

Now, the $2.6 billion Ackman and Valeant made from that deal is at risk because Allergan shareholders are suing them for insider trading. Legal or not, it was a deal that raised eyebrows the moment it was announced. It always seemed really close to the line.

Getting too creative — maybe that should be on the list of regrets.

That said, an apology is still huge for Ackman. Last year, as Valeant was crashing hard, he wrote in his annual letter that he continued "to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price."

He even blamed traders who followed him in and out of his trades for adding more volatility to the stock.

This year's letter...this is growth.

"My approach to mistakes is that I personally assume 100% of the responsibility on behalf of the firm while sharing the credit for our successes. While I and the rest of the Pershing Square team have suffered significant losses from this failed investment as we are collectively the largest investors in the funds, it is much more painful to lose our shareholders’ money, and for this I deeply and profoundly apologize."

Read the full letter here>>>

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One of this year's most anticipated hedge fund launches is bigger than expected.

Brandon Haley's Holocene Advisors started trading April 3 with about $1.5 billion, according to a person familiar with the matter. The news was previously reported by Bloomberg. That figure is about $500 million more than was expected a little over a month ago.

Potential investors were told that the fund had attracted four separate $200 million investments, people familiar with the matter previously told Business Insider.

Two of those tickets came from Goldman Sachs Asset Management and BlackRock, Bloomberg reported.

The fund has long been expected to be one of this year's largest, with Haley said to be putting in a significant amount of his net worth into the fund. The firm will initially employ a stock strategy focused on the consumer, industrials and tech, and media and telecommunications sectors, people familiar with the firm said.

Holocene's launch size was already big by current hedge fund standards, and comes as some industry titans are shutting.

Haley previously was Citadel's global head of equities from 2005 to 2015. His New York-based firm, which is located north of Madison Square Park, employs 24 people, a person familiar with the firm said.

SEE ALSO: Some of the biggest hedge funds are closing — here's what it takes to launch one today

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LONDON/NEW YORK, April 4 (Reuters) - British hedge fund manager Alan Howard has raised more than $700 million from outside investors for a new fund that he will solely manage, two sources with knowledge of the matter told Reuters.

One of the sources said the AH fund, which started trading on March 1, had raised an additional $2 billion from the main fund at Howard's firm, Brevan Howard Asset Management.

Hedge fund firms that launch new funds sometimes move money from existing funds as well as raising cash from investors externally.

The AH Fund seeks a minimum $50 million investment from each investor, documents filed with U.S. regulator the Securities and Exchange Commission showed. That is far bigger than the average hedge fund investment per investor of $1.9 million, according to data from global industry tracker Preqin.

A spokesman for Brevan Howard declined to comment.

Howard's new fund, which is named after his initials, will charge a management fee of 0.75 percent and a performance fee of 30 percent.

The product - which is still open to new investment - has been launched at a time when Brevan Howard, which manages $14.6 billion, has seen an asset decline of around $22 billion since 2012, from a combination of losses and client withdrawals.

Howard founded Brevan Howard in 2002 along with four former colleagues from Credit Suisse and quickly gained assets based on savvy macroeconomic bets.

Brevan Howard was granted an injunction on March 23 to prevent Reuters publishing a story about the firm, claiming the company's right to confidentiality outweighed public interest. (Reporting by Maiya Keidan; Editing by Pravin Char)

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