Hedge Funds.......

[FinanceDude]

I'm sure brewer can provide some great imput here. The reason I bring it up is hedge funds are the fastest growing area of investing. Today, there's over $1 trillion in them, and that number continues to increase.

They're not for folks who like low ER..........right brewer? But a lot of waelthy folks are putting a decent chunk of their net worth in them. You have to be a "qualified investor", which usually means make $150,000 a year on a 3-year average, or have $1million in investable assets.

Managers take 20% of the gains as compensation. The main advantage is the manager or managers can load up on out-of-favor stocks, boullion, real estate, whatever.........

 

[LOL!]

Did I just go back in time 2 years? Recent articles on hedge funds show how passe they are. I would like to know next years news, not last years news.

http://articles.moneycentral.msn.com/Investing/Extra/TheHighRiskRewardsOfHedgeFunds.aspx
http://moneycentral.msn.com/content/P116563.asp

 

[brewer12345]

Our flagship fund charges 1% of assets and 20% of profits, and we are relatively cheap for a fund with a good track record. Increasingly common is "2 & 20" and "2 & 25." Its like the mutual fund world: if you can pick a consistently good manager, you will make returns far above the indexes, but you had better be good at picking because there are lots of mediocre hedge fund sthat still charge ourageous sums to manage money.

 

[Rich_by_the_Bay]

What's a hedge fund?

I've never read a definition that makes sense to me.

 

[Delawaredave]

What's the definition of a "hedge fund" ?

What I understand, it is like a small mutual fund "without rules" - they manage using:
- whatever trading techniques they want (buying, selling, arbitrage, options, leverage, etc), and
- in whatever asset classes they want

This sounds like the "antithesis" of "buy and hold index/ETF investing" - very high fees, very active management, lots of transactions, etc.

I can't understand all the allure. I'd guess these things are very sexy in up markets, and then fade away in down markets.

 

[Martha]

But a lot of waelthy folks are putting a decent chunk of their net worth in them. You have to be a "qualified investor", which usually means make $150,000 a year on a 3-year average, or have $1million in investable assets.

An "accredited investor" is a person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000.

The alternative test is an income test, which would include a person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

These are securities law requirements. If an unregistered security is sold there are limitations on who you can sell to. Selling an interest in a hedge fund is the sale of an unregistered security so the owner of the fund will want you to be accredited if an individual or be an institutional investor. The sale is through what is called a private placement. These mechanisms to avoid registration under the securities laws are in large part what makes a hedge fund a hedge fund and not a mutual fund.

As mentioned, generally the fund manager gets paid a portion of the profits and that portion can be big.

 

[free4now]

Yeah, I never could understand why people wanted into hedge funds. It seems to me it's the financial analog of the small boutique clothing store... you pay at least twice as much, have a smaller selection than the bigger stores, but you can't help yourself because of the dream of finding a gem that nobody else knows about.

I think hedge funds take advantage of rich people who think they are entitled to higher returns because of their "status level" of being qualified investors.

 

[omni550]

The sale is through what is called a private placement.

Martha & anyone else,

I've been approached several times to participate in a'private placement' that promised extraordinary returns.

In one case, my funds (a VERY large amount) were to be deposited in a bank. Other banks would "ping" that account to ensure that the funds were there, and this, in turn, would allow my bank to make a great deal of money based on my resident funds. My account was to be paid handsomely (more than 10% weekly) for allowing my funds to be "on account and untouched" for a period if time (like a year).

I was assured repeatedly this this was all on the "up & up", but had to be done on a private basis. It sounded too good to be true, so I declined.

Have any of you heard about any such private placement opportunities?

omni

 

[mathjak107]

my future daughter inlaw works for tudor investments as an accountant doing their taxes. they are one of the most successful hedge funds ever. most of what they do isnt public information but mr tudor has one amazing track record.

 

[Delawaredave]

In one case, my funds (a VERY large amount) were to be deposited in a bank. Other banks would "ping" that account to ensure that the funds were there, and this, in turn, would allow my bank to make a great deal of money based on my resident funds. My account was to be paid handsomely (more than 10% weekly) for allowing my funds to be "on account and untouched" for a period if time (like a year).

This sounds more like a scam than a hedge fund.......

 

[FinanceDude]

Did I just go back in time 2 years? Recent articles on hedge funds show how passe they are. I would like to know next years news, not last years news.

http://articles.moneycentral.msn.com/Investing/Extra/TheHighRiskRewardsOfHedgeFunds.aspx
http://moneycentral.msn.com/content/P116563.asp

I don't call $1 trillion dollars passe..........maybe you do..........

Considering where they were 6-7 years ago, it is explosive growth........

 

[mathjak107]

there are 5,000 or so hedge funds and some have done phenomenol.

usually the manager gets 20% of the profits and even with that the investors can still see 30% returns. but its just as easy to loose it all.

alot of the real talent today in the industry has shifted to managing hedge funds.

i guess if you can afford to loose the money than you can take the chance.

i know if i could i would have given tudor investments a shot thats where my daughter inlaw to be is an accountant.
paul tudor jones seems to crank out excellent returns .

 

[Martha]

Martha & anyone else,

I've been approached several times to participate in a'private placement' that promised extraordinary returns.

In one case, my funds (a VERY large amount) were to be deposited in a bank. Other banks would "ping" that account to ensure that the funds were there, and this, in turn, would allow my bank to make a great deal of money based on my resident funds. My account was to be paid handsomely (more than 10% weekly) for allowing my funds to be "on account and untouched" for a period if time (like a year).

I was assured repeatedly this this was all on the "up & up", but had to be done on a private basis. It sounded too good to be true, so I declined.

Have any of you heard about any such private placement opportunities?

omni

This is one on me. Sounds weird. 10% a week is too much to be real.

 

[ats5g]

Martha & anyone else,

I've been approached several times to participate in a'private placement' that promised extraordinary returns.

In one case, my funds (a VERY large amount) were to be deposited in a bank. Other banks would "ping" that account to ensure that the funds were there, and this, in turn, would allow my bank to make a great deal of money based on my resident funds. My account was to be paid handsomely (more than 10% weekly) for allowing my funds to be "on account and untouched" for a period if time (like a year).

I was assured repeatedly this this was all on the "up & up", but had to be done on a private basis. It sounded too good to be true, so I declined.

Have any of you heard about any such private placement opportunities?

omni

I found this on the Securities and Exchange Commission's website on How Prime Bank Frauds Work. I'd run away fast.

The SEC just nailed some scamsters in this area: SEC Files Emergency Enforcement Action to Halt $18.2 Million Cross-Border Prime Bank Scheme

- Alec

 

[omni550]

Martha and Alec,

Thanks for the helpful feedback.

omni