A hedge fund is an investment vehicle, which can use many different trading strategies in the pursuit of their trading objectives. They can take long or short positions in equity markets use arbitrage, trade options, commodities, bonds and other derivatives trading instruments available for trading.  Hedge funds simply trade any asset, which the fund manager believes can offer potential benefits for its investors, at reduced risk.

A hedge fund is simply a lightly regulated, limited partnership, of qualified investors, who meets the Securities and Exchange qualification requirements, established under the U.S. Securities and Exchange pre-qualification status specified under Rule 205-3(d)1 of the U.S. Investment Advisers Act of 1940. There are two types of hedge funds, a domestic hedge fund, and offshore hedge fund. Domestic hedge funds are based in the United States and are organized under the laws of the United States. Offshore hedge funds are generally domiciled in foreign low tax jurisdictions such as Cayman Island, Luxemburg, or Dublin.

What is a hedge Fund

A hedge fund is an investment vehicle, which can use many different trading strategies in the pursuit of their trading objectives. They can take long or short positions in equity markets use arbitrage, trade options, commodities, bonds and other derivatives trading instruments available for trading.  Hedge funds simply trade any asset, which the fund manager believes can offer potential benefits for its investors, at reduced risk.

A hedge fund is simply a lightly regulated, limited partnership, of qualified investors, who meets the Securities and Exchange qualification requirements, established under the U.S. Securities and Exchange pre-qualification status specified under Rule 205-3(d)1 of the U.S. Investment Advisers Act of 1940. There are two types of hedge funds, a domestic hedge fund, and offshore hedge fund. Domestic hedge funds are based in the United States and are organized under the laws of the United States. Offshore hedge funds are generally domiciled in foreign low tax jurisdictions such as Cayman Island, Luxemburg, or Dublin.   

What is the origin of Hedge Funds?

All the available literature on the history of hedge funds, trace its development to Alfred Winslow Jones in 1949. Jones conceived that taking both long and short positions in investment portfolios has the tendency to increase the returns of the portfolio, while at the same time reduces the associated risk elements. Credit was given to Jones as the originator of the concept of hedge funds, because his fund model was the first to utilize private partnership and the concept of leverage in forming both long and short positions in a selected group of stocks.

Who can invest in Hedge Funds?

Any investor that meets the U.S. Securities and Exchange requirements of accredited investor as stipulated in the Securities and Exchange Act of 1940 can invest in Hedge Funds. Accredited investors must have a net worth of over $1 million.  You may also qualify to invest in hedge funds if you earned $200,000 in the past two years not including your spouse’s income, and you expect to continue earning such income in the near future. For husband and wife the combined net assets must be at least $1.5 million.

What is the minimum investment requirement to invest in Hedge Funds?

The minimum investment requirements for hedge funds differ from one company to the other. Newer hedge funds may charge between $250,000-$500,000. Hedge Fund of Funds may charge smaller amount. The older and more established hedge fund managers may charge much more as their minimum investment, from $1million to $5 million and possibly more.

What is the average Fees charged by hedge funds?

All hedge funds charge two sets of fees, annual management fee and performance fee; such charges may again differ from one fund to the other. The annual management fee may range from 1-2% of the total assets, while the performance fee may range from 15-20% of the realized profits. The performance fees are waived if the fund made no gains during the period in question.

What is the job of a hedge fund manager?

The hedge fund manager oversees the day-to-day trading decisions of the fund, in addition to other important tasks of the firm. Hedge Funds are generally organized as limited liability companies, where the fund’s risks are shared by the limited and general partnerships of the said fund.

When can I withdraw my assets from a hedge fund?

Your assets invested in hedge funds may only be available for withdrawal on quarterly, bi-annual or annual basis. Each fund establishes rules, which guides investor withdrawals from their account. During a lock-up period no money may be withdrawn from individual hedge fund accounts.

What are Lock-up period?

Lock-up period refers to a specified period when investment assets in the fund may not be available for withdrawals. Until the expiration of the lock-up period, investors may not be able to withdraw any money from their accounts. Locks up periods differ from one fund to the other, and some funds may not have lock-up periods.