Hedge Funds

The book I read to research this post was Hedge Funds for Dummies by Anne C Logue which is an excellent book which I bought from kindle. There is no legal definition of the words hedge fund so any old fund can use the name. Equally just because someone says he is portfolio manager for a hedge fund doesn't necessarily mean he is wealthy. Some hedge fund managers have been lucky for a couple of years and have no ability whatsoever. The type of hedge fund described in this book you won't find on the internet and you must have at least $1 million of wealth minimum or they won't be interested. They may very well ask for proof as to what you are worth. There is a trade off between risk and return that you must bear in mind when shopping around. Potentially this type of fund can make you a nice return on your investment but equally you can lose a lot of money. You will typically pay the fund manager 1-2% on what you invest and 20% on the revenue he makes on your money, rising to 35% if he makes more than 50% revenue on your money. The best fund managers may charge even more. A lot of hedge funds borrow money to maximise their returns and this money has to be paid back regardless whether you have made money or not. Sometimes hedge fund money as venture capital for new business start ups. A lot is also invested in things like stocks, shares, commodities, futures and currencies. You can make a quick profit in things like commodities by buying when low and when the price goes up selling but you won't make a lot of money this way. It's a long term investment and if you draw money out suddenly expect to be penalised but you should get an annual report telling you how your money is doing. Finally hedge funds are for wealthy people who can afford if their fund does badly. I don't think I'll be investing in hedge funds but this book does make an interesting read.