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What the F is a Hedge Fund?
The family office pivot is changing everything.
Hi ,
There’s a reason hedge funds built their reputation on mystery and intrigue.
For decades, they positioned themselves as the private weapon of the ultra-wealthy: exclusive, opaque, and alpha-driven. But for most investors, that promise broke.
Over the last decade, the average hedge fund returned just 4% annually—while the S&P returned over 12%.
Institutional investors started exiting. Wealthy families followed. And many stopped outsourcing performance altogether.
Instead, they built something better:
In-house structures for compounding capital with control.
This week’s issue breaks down exactly how they did it, and how LP syndicates like Build Wealth now make this approach accessible without a $100M portfolio or full-time staff.
Here’s what we’re covering:
What a Hedge Fund actually was… and is.
The role of absolute return in your portfolio.
The 3-layer Playbook to build what Hedge Funds promise.
How the Ultra-Wealthy are retaking control through Family Offices
How George Soros pivoted from fund to family office.
If you’ve ever wanted the control, compounding, and deal access of a family office, this is your blueprint.
Let’s build it.
SHIFT YOUR STACK
What the #&*$ is a Hedge Fund?
Hedge Funds, Without the Hedge… Are Just Funds.
There’s a lie hiding in plain sight on Wall Street.
It’s wrapped in prestige.
Sold in layers of complexity.
And dressed in a 2-and-20 fee structure that hasn’t evolved with the strategy.
It’s the modern hedge fund.
These vehicles were originally designed to hedge market exposure—go long on winners, short the underperformers, and deliver steady, uncorrelated returns regardless of how the S&P moved.
But that’s not what most of them do anymore.
Today, hedge funds often offer increased exposure—not less. They’ve become high-fee, high-leverage portfolios chasing alpha… with honestly, average outcomes.
So… what actually is a hedge fund?
Think of it like this:
A hedge fund is a private investment pool where a manager can bet on almost anything—stocks rising, stocks falling, currencies, commodities, interest rates, you name it.
They’re like mutual funds with fewer constraints—and a much broader playbook.
They use tools like leverage and short selling to aim for “absolute returns”—that is, positive performance regardless of market direction.
Think of absolute return like this:
→ Market goes down? Doesn’t matter—absolute return still delivered positive performance.
→ Market goes up? Absolute return delivered gains (which may or may not beat the market).
Absolute return is about aiming for positive returns in all market conditions, largely independent of how the broader market performs.
Originally, the goal was to reduce risk.
Today, many of these funds just offer a different kind of risk—with a premium fee.
What began as a disciplined, market-neutral strategy has evolved into a trillion-dollar industry driven by scale, speed, and information arms races.
Complexity replaced clarity.
The "hedge" disappeared.
The fees remained.
Over the last 10 years, hedge funds have generated roughly $60 billion annually in revenue, including both management and performance fees. That’s approximately 36% of their total gross gains over the period. Since the early days of the industry, managers have driven $3.7 trillion in total gains but collected $1.8 trillion in fees—about 49% of those gains. All this while delivering an average 4.0% annual net return—less than what you’d earn from today’s top high-yield savings accounts.
Unsurprisingly, this has increased pressure on managers to either lower fees or better justify their value in a performance-conscious environment.
And yet the brand remains strong.
The top 1% of funds deliver impressive results.
But most investors end up paying hedge fund prices for index-level returns—without the liquidity or transparency.
Meanwhile, a different set of investors—those focused on control, cash flow, and asymmetric upside—have started moving in a different direction.
Instead of outsourcing their hedge, today’s LPs are building it—on their terms, with their capital, and with transparency Wall Street won’t give you.
They’re using:
Collateralized private credit (often with controls)
Sub-institutional real estate
Private, cash-flowing operating companies or those needing growth capital
Asset-backed structures with downside protection and real alignment
This issue breaks down how to think like a hedge fund manager—without paying for one.
For a deeper dive, we compiled the full evolution of hedge funds in one place—from origins to modern strategies, and why institutions still play the game.
THE PLAYBOOK
How to Build What Hedge Funds Promised
The original hedge fund wasn’t built to beat the market.
It was built for independence.
Alfred Winslow Jones launched the first one in 1949 with a simple idea: long the winners, short the losers, hedge the market risk, and let skill—not luck—drive returns. Early hedge funds were disciplined, nimble, and different. Many outperformed because they had edge, not just exposure.
But then the money came.
Pensions. Endowments. Sovereign wealth. And with institutional capital came institutional drift—complexity, leverage, opacity, and performance dilution. Today, most hedge funds no longer hedge anything. They chase absolute returns while charging premium fees, often with limited transparency or alignment.
Where the Smart Money Headed Instead
In 2024, just 18% of large endowments and 7% of public pensions still held hedge fund allocations.
Family Offices have seen a 10.8% annual growth in AUM over the last 5 years.
Tiger 21 members dropped their hedge fund exposure from 12% in 2008 to just 2% today.
Their capital is now flowing into private credit, direct equity, and real assets.
In 2025, global private credit AUM surpassed $2 trillion, having grown roughly fivefold since 2009. Private credit now represents one of the fastest-expanding asset classes in financial markets. Credit managers raised $209 billion in 2024 alone, putting the class on track to exceed $3 trillion by 2028.
This is also why it’s been one of my largest personal reallocations over the past 3 years. I’m currently the largest investor in our private credit fund, Buildflow I, on target to generate 11+% cash-on-cash returns for our investors this year.
Sophisticated LPs have redesigned the Hedge strategy—and started with structure.
Instead of relying on outside managers, they’re owning their capital stack directly: cash-flow-first deals, asymmetric terms, and real operational leverage.
Architect Your Own Absolute Return Portfolio
Beating the market or a benchmark isn’t enough. Instead, aim for absolute return—positive performance in any market, bull or bear. The irony is, you can now build the absolute returns the top 1% of hedge funds deliver—without Wall Street.
Here’s how:
Layer 1: Anchor in Beta (Durable, Fee-Light Foundation)
Every portfolio needs a base that compounds regardless of headlines. Think:
Low-fee index exposure for optional liquidity
Stabilized real estate with contractual yield (e.g. NNN retail, mixed-use in infill locations)
Senior-secured private credit with collateral and fixed coupons
Example: A 9% yield note backed by recurring HVAC service contracts
Or a downtown St. Louis building paying 8% current cash with long-term upside
This layer keeps you in the game—even when the market isn’t.
Layer 2: Seek Alpha (Where Access and Asymmetry Live)
This is the part hedge funds talked about. But few delivered.
Real alpha today comes from being close to the value creation:
LP stakes in operator-led rollups
Co-investments alongside founders or GPs
Asymmetric carry in niche private credit or energy funds
Preferred equity in high-cash-flow, underbanked deals
Example: A 35% IRR on a cash-flowing, oil well rollup play, with a quarterly cash yield and equity upside. Or maybe a growth capital investment that returns 100% of your investment in ~12 months but you keep the equity on a business that is hoping to 8x over the next 5 years.
It may not be publicly listed, nor widely marketed, but it’s absolutely available (actually these are direct examples of opportunities we’ve offered through Build Wealth and I am personally invested in.)
This is a direct slice: off-market, selectively shared, and structured for real alignment.
Layer 3: Don’t Hedge—Find Your Edge
Most hedge funds aren’t protecting downside anymore. But your portfolio can.
Your edge lives in how you design your strategy:
Match liquidity to your timeline
Avoid reinvestment risk
Own tax-advantaged assets
Minimize volatility drag
Compound real cash flows—not just paper gains
Be the Smart Money – find the deals where you’re the edge
I built the Wealth Stack model to make my own portfolio work as hard as I do. It’s diversified, non-correlated, smarter, and engineers alignment with sponsors and operators.
When built right, it performs like a hedge fund was meant to—without the opacity, leverage, or layers of fees.
Use absolute return as your North Star. Use the Wealth Stack as your blueprint.
If you’re building your own portfolio, think like an architect.
Traditional allocation models and benchmarks offer a starting point, but real investors build portfolios aligned with how they actually live, earn, and exit.
Specifically:
Want cash flow with structural protection? Start with private credit.
Want non-correlated, appreciating assets that cash-flow? Add sub-institutional RE.
Want long-term asymmetric upside? Layer in growth equity with protection terms.
Want diversification across macro cycles? Own real assets with leverage.
Want tax-optimized compounding? Stack with depreciation and flow-through vehicles.
Interested in finding private deals to complement your portfolio?
You can always see what I’m investing in in our investor portal at Build Wealth. We currently have offerings in cash flowing, collateralized credit funds, monopoly real estate plays, an oil well rollup, and a video game publisher holding the 007 license–and a completed $150 million game ready for launch.
Our firm looks for world-class teams operating in areas of supply / demand imbalance, conduct 3rd party diligence while negotiating superior terms for our investors, invest my own capital, and invite our community to join.
Build Wealth isn’t just a movement: it’s a master plan to work on awesome projects, with great people, and stack cash.
If you’re interested in making the leap from $2 - $20+ million in net worth, I hope you’ll consider joining us.
BEHIND THE NUMBERS
Hedge funds are losing their edge as the ultra-wealthy are taking their capital in-house.
UHNWI’s are voting with their feet. The top 20 rated hedge funds saw ~$57 billion in net outflows, while family offices quietly grew by over $2 trillion in AUM. The data tells the story loud and clear, capital is shifting away from the opaque, fee-heavy funds and into structures that prioritize control, clarity, and compounding.
CASE STUDY
From Hedge Fund Titan to Family Office Architect — George Soros’s Wealth Stack Shift
Back in 2010, most investors believed hedge funds were still where alpha lived.
And for decades, George Soros delivered exactly that—averaging over 30% net annual returns at the helm of the Quantum Fund. But in 2011, he made a quiet pivot that speaks volumes today.
He returned outside capital and converted Soros Fund Management into a family office.
“We decided to return outside money because of increased regulation and a desire to focus purely on internal capital.”
This shift marked a strategic pivot—from external performance to internal optimization.
Today, Soros Fund Management manages more than $25B in family wealth. The strategy is diversified, global, and multi-asset—but fully controlled. Public investments. Private equity. Real estate. Philanthropy. No mandates. No quarterly pressure. Just intentional capital at work.
And Soros isn’t the only one. FundCount (2017–2020) and other industry reports highlight numerous cases where hedge fund founders have shifted to single-family office models, seeking regulatory simplicity, lower fees, greater autonomy, and increased alignment.
The lesson?
Taking control of your financial journey is the ultimate compounder.
When you architect your portfolio on your terms, like Soros did, you design a strategy that compounds beyond performance. It aligns with purpose, timeline, and the freedom to act.
This model doesn’t require a billion-dollar fund. It requires a repeatable Playbook built for ownership and alignment.
IN PARTNERSHIP WITH BUILD WEALTH
Want to Learn How Billionaires Actually Invest?
I’m speaking this Friday at 11:30am CST at the Invest Like a Billionaire Virtual Summit, and I want to invite our readers here at WSW. If you’re an accredited investor, you should be there.
You’ll get a front-row seat to how the ultra-wealthy structure their portfolios—how they protect downside, build durable cash flow, and compound real wealth behind closed doors.
ONE DAY. No Fluff. Just real talk about what works.
I'll be breaking down the strategy behind Build Wealth — and how we're stacking the investor, entrepreneur, and deal-maker skill sets to generate asymmetric returns in today’s market.
The speaker lineup is ridiculous:
Walker Deibel – Private market wealth builder
John Maxwell – Legendary leadership expert
Justin Donald – Lifestyle investor and systems thinker
Bob Fraser – My macro-economic maestro partner at BuildFlow and BuildEnergy
Tom Wheelwright – CPA to the wealthy, tax strategist to billionaires
Ken McElroy – Real estate mogul from the Rich Dad world
It’s hosted in partnership with Aspen Funds, my co-sponsor in two of our current investment platforms at Build Wealth, and it’s 100% free.
Bonus: You’ll also get instant access to Bob Fraiser’s Billionaire Investing Bundle just for registering. Here’s the link to sign up:
See you there?
— Walker
MINDSET SHIFT
The Wealth Rebellion
Hedge funds didn’t lose their edge—they gave it away.
They scaled. They softened. They started selling access instead of performance.
And investors paid the price: 2 and 20 for beta.
But the financial rebellion has already started.
Soros knew it, Tiger 21 saw it, and now LPs are waking up to the same truth:
The edge isn’t out there to be found. It’s inside the structure.
If you want real absolute return today, build your own damn money machine.
"The best investor is someone who has the ability to do nothing when nothing is to be done"
Stan Druckenmiller
DISCLAIMER
OFFER: This presentation (“Presentation”) is neither an offer to sell nor a solicitation of an offer to buy any security, nor is it an offer of any sort of investment advice. Instead, it is intended to describe an investment vehicle sponsored by Build Wealth, LLC, TBD (the “Offering”). An offer may only be made via a written offering document (“Memorandum”) provided by the Fund that offers Units of limited liability company interests in the Fund (“Units”). We have prepared this Presentation solely to enable you to determine whether you are interested in receiving additional information about the Fund. This Presentation is not intended to be relied upon as the basis for an investment decision, and is not complete.
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