Like mutual funds, hedge funds combine investors' money to invest and, hopefully, return a profit. Hedge funds try to evade down turns in the market; of course their success depends on the skills of the manager. Unlike mutual funds, these are extremely risky, unregulated and privately operated. Oftentimes they use speculative practices like leveraging. As of 2004, only SOME hedge fund managers are required to register with the SEC. If a hedge fund manager is registered, only a small amount of information has to be shared with the SEC.
The investors frequently have a $1 million minimum to join and are limited to 499 Limited Partners that can invest in one fund. The portfolio managers collect 1-2% of the investor's assets plus around 20% of the profits. Proceed with caution as many hedge funds do not allow selling but quarterly or yearly, meaning the investor could be trapped in the fund when the market turns.
Return to Investments...
