In 2017, the hedge fund world was in the midst of a wild and volatile ride that began with a huge loss that led to massive losses.
Now, the entire sector is reeling from the collapse of one of the largest funds in the world, Vanguard’s Fidelity Automatic Investment (FSI), which in late 2018 plunged nearly 60% in a matter of months.
And the worst part of it all?
The market itself is still reeling.
In fact, it may be one of those sectors where investors are looking for something else entirely.
“This is the most volatile and volatile period I’ve ever seen,” said Peter Drucker, a hedge fund analyst with Morningstar.
“It’s not really a time to be sitting in a bar.
You need to be looking at a portfolio.”
And in 2017, investors were looking for nothing but the latest in tech.
In other words, they were looking to find a way to take advantage of the volatility and take advantage from it, even if it meant investing in something that was risky.
The industry is a perfect storm of volatility and risk-averse investors, Drucker said.
“The companies that are making the most money are not going to be the ones that are going to get hit hard by it,” he added.
So, where do these people find their funds?
There are two ways to find them.
You can look at the fund management industry, where a lot of the money is invested in private equity firms, which are typically run by a small team of managers.
You also can look to the stock market, which is dominated by large, well-capitalized hedge funds.
But these companies have a few things in common: They are owned by private equity investors, and the fund managers are mostly people from the tech industry.
In the tech sector, the private equity industry is also heavily influenced by big tech companies, which can be a very risky investment.
“I think in the past two or three years, they have been a little more risk-oriented,” Drucker told Business Insider.
“So if you’re looking at hedge funds, the best bets are going into tech stocks.”
For example, in the second quarter of 2018, Fidelity lost more than $7 billion on tech stocks.
That’s when it went public, and in 2017 it had about $40 billion in assets.
So it’s a bit of a different beast for tech stocks to ride in 2018.
But in the end, Druker said that in the tech space, it all boils down to one thing: technology.
“Technology is the one thing where the big tech firms are holding the cards,” he said.
And he’s right: Tech stocks are worth a lot more than the stock sector.
They’re more liquid, more liquidity-based, more volatile, and have less downside risk than the broader market.
So in the long run, these companies will be worth it.
And if you want to get into tech investing, Druck said, “If you can afford to put in the money, I think you’ll be happy to take that risk.”
For more on how tech investments can be risky, check out our guide to investing in tech companies.