Regional banks are the best hedge funds. That is why Warren Buffett got out of the hedge fund business and kept his rollup of regional banks and insurance companies for himself. Think about it. You have “investors” putting their money with you and all they expect is a 2.66 per cent annual rate of return, according to bankrate.com’s quote on average money market rates. So you give them their 2.66 per cent return and get to invest the money in ways that generate a higher return and you get to keep 100 per cent of the profits.

Compare this with a hedge fund where investors want, in an ideal world, 10-20 per cent returns and you get to keep only 20 per cent of the profits. How do regional banks invest the money of their “investors”? (I use the quotes because “customer” is a term banks use so you feel great about your 2.66 per cent instead of mildly annoyed by it, which you would be if you were called an investor and only getting 2 per cent.) Answer: mortgages primarily, plus treasury bills, municipal bonds, and, occasionally, hedge funds. Banks also make money from fees for opening accounts, paying bills, and so on.