A Basic Introduction to Hedge Funds

Overview :
A hedge fund pools money from several persons or organizations who invest money in various financial instruments and vehicles. In addition, only certain types of investors are allowed to participate in the Fund. In general, investors ' net worth individuals " should be as defined by the SEC . Hedge funds are similar to mutual funds that several mutual fund business angels to invest in a single portfolio , however, hedge funds have more flexibility in their investment choices , such as taking short positions based on their positions , complex derivatives trade and investment in side pockets .

fees:
Fund managers generate revenue by a management fee and a performance fee. Management fees in the range of 1% to 4 % per annum of the invested ; performance fees range from 10% to 50 % of the annual performance of the Fund. Most funds use the rule of flooding , which means that performance fees were collected only on profit after losses in previous years, is removed .

Investment Strategies :
Hedge funds are very different and use a variety of investment strategies. Some of the most notable strategies include : Global macro , arbitrage , emerging markets , distressed securities , long / short equity and fund of funds.

structure :
Hedge funds are usually structured as limited partnerships with the fund manager as a partner and investor as sponsors. Here are the administrators and managers junior analysts to support the operation of the fund and analysis of investment decisions. Moreover, the people for marketing the fund to potential investors are used.

regulations
Because hedge funds are closed non- qualified investors , less regulation to protect investors apply . For example, they have a milder level of coverage. However, they must follow strict rules of the SEC and various laws to set the rules . An important area of ​​regulation on the marketing of the Funds. The SEC prohibits hedge funds from advertising open for investment opportunities and requires accurate information on all marketing materials.

Employment in the industry :
Most hedge funds in the United States on the east coast . Many have their headquarters in New York and Greenwich , CT. Chicago, IL is another important center . Due to the relatively small size in terms of employees , they do not usually set for the recruitment of graduates and timetables can outsource much of their attitude . Networking and stamina offer the best employment opportunities .

Now you know the most basic aspects . Keep coming for more in-depth article. For more information regarding investments, see investopedia.com definitions and learning materials.

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