| Fund redemptions are nothing new. Every | | | | fund investment for $100,000 and a mutual fund |
| recession or bear market sees investors | | | | for $50., a managed account may require a |
| redeeming their fund investments and moving to | | | | minimum investment in excess of $1 million. Not |
| asset classes which provide a greater degree of | | | | so good for everybody. |
| safety. For most, this is the Government | | | | But lets suppose you can convince your hedge |
| Treasury Bill also called the T-Bill. | | | | fund manager to accept your $100,000 what |
| While reasons for redemptions are as varied as | | | | advantage do you gain. |
| the investment selections themselves, it seems | | | | |
| that individual investors are uncertain of their | | | | 1. the investment account is actually in your name |
| understanding of what their money has been | | | | and not in the funds name; |
| invested in. While mutual funds are marketed to | | | | 2. your account is segregated from all other |
| the investor with a lower knowledge of | | | | trading accounts; |
| investment products, the hedge fund has always | | | | 3. instead of waiting for your monthly or quarterly |
| been the investment choice for more | | | | statements, you can see the activity in your |
| knowledgeable investors or the "Accredited | | | | account on a daily basis in real time; |
| Investor". But now it seems even this group is | | | | 4. cash deposits or withdrawals can be simplified; |
| calling for the need of greater understanding from | | | | 5. you have an overall increase of account |
| their investment managers. | | | | transparency; and |
| The battle for returns which out perform the | | | | 6. you can no longer claim you did not know what |
| index has resulted in many Portfolio Managers | | | | was going on in your account. (oops, is that a |
| refusing to disclose their trading program for fear | | | | benefit?). |
| others will duplicate their trading style. It is said by | | | | There are also some disadvantages. Or put |
| many managers that it is this ability to observe | | | | another way, the pooled investment structure |
| unique characteristics in the market place that | | | | provides some distinct advantages which originally |
| differentiates their funds performance from the | | | | made them popular since the first hedge fund |
| typical returns generated by bottom quartile | | | | was created in 1949. These funds should not be |
| performing funds and fund managers. Of course | | | | confused with the investment account managed |
| the unregulated hedge fund industry has | | | | by your stock broker. The professional Portfolio |
| perpetuated this myth by trusting the Accredited | | | | Manager will continue to exercise complete trading |
| Investor with an above average knowledge of | | | | autonomy and does not want your advice on |
| the market and his ability to select the correct | | | | how to manage the assets in your account. |
| investment for their portfolio. It seems the | | | | Advantages for remaining in a hedge fund or |
| Accredited Investors does not always posses | | | | mutual fund: |
| greater knowledge than their more | | | | |
| un-sophisticated mutual fund brethren. | | | | 1. investors can obtain the services of a |
| So that bears the question of how to obtain this | | | | professional fund manager with smaller sums of |
| transparency to the satisfaction of the investing | | | | money; |
| public? And the answer is the Managed Account. | | | | 2. management costs are cheaper since it is more |
| Managed Accounts are simply individual accounts | | | | economical to manage one large account instead |
| opened in the name of the investor. These | | | | of many smaller accounts; |
| accounts are not pooled, yet they are identically | | | | 3. you pay one flat management fee, no |
| structured and managed by the hedge fund | | | | commissions; and best of all |
| Portfolio Manager in the same style as the pooled | | | | 4. you still have someone to blame if things go |
| fund. The critical difference is the investors ability | | | | wrong. |
| to see every trading transaction performed in the | | | | It is estimated that the hedge fund industry |
| account by the fund manager. | | | | managed $2.7 trillion dollars by the end of 2008. |
| The popularity of the pooled investment structure | | | | The mutual fund industry manages $19 trillion |
| is that investors do not have to deposit large | | | | investment dollars. So there is no question of the |
| sums of money to utilize the services of a | | | | popularity of the industry since that first fund in |
| professional Portfolio Manager. Most successful | | | | 1949. |
| professional Portfolio Managers do not accept | | | | If transparency is an issue for you, you need to |
| accounts less than US$10 million dollars. | | | | take a long, hard look and evaluate the pros and |
| The hedge fund and mutual fund gained popularity | | | | cons wisely. Take some time to speak with your |
| by allowing smaller sums of money to be pooled | | | | fund manager about a managed account, it just |
| with other deposits from many other investors. | | | | might be the alternative you have been looking |
| So while you can currently participate in a hedge | | | | for. |