| Hedge Funds are a bit funny; you have to | | | | but at a much lower broker's fee. |
| pay 3 to 4 percent for management fees | | | | Look-alike funds mimic ETF's |
| and other fees, plus about 20 percent of | | | | relationship to mutual funds, by running |
| the profit, yet more and more people are | | | | profiles of the investment strategies of |
| crazy about them. For many years average | | | | various hedge funds and mimicking them. |
| hedge fund returns were 11 percent | | | | Then the broker fee is only 1 or 2 |
| according to Business Week, but now the | | | | percent, and there is no whopping 20 |
| returns have become lower on the huge | | | | percent profit fee. These look-alike |
| amounts invested in hedge funds. Maybe | | | | funds are definitely around, and if you |
| there is too much competition. Many | | | | ask your broker about them or do a few |
| smaller investors are involved in hedge | | | | Google searches, you can get them. |
| funds through fund of fund groups, which | | | | Although hedge funds total about $1.5 |
| require as little as a $25,000 | | | | trillion in invested funds and mutual |
| investment, as opposed to a $1 million | | | | funds total much more money, about $8 |
| investment directly in a hedge fund. A | | | | trillion, hedge funds have an increased |
| fund of funds is a mutual fund that | | | | weight because of their use of leverage. |
| invests in several different hedge | | | | At a ten to one ratios the effective |
| funds. This gives an opportunity for | | | | investment power of the hedge funds can |
| smaller investors, but the fees are | | | | be greater than mutual funds. |
| higher, since there's one more level of | | | | To tell you the truth, if you read the |
| management to deal with. Altogether | | | | financial press, it is a bit of a |
| there is believed to be $1.5 trillion in | | | | mystery what exactly the frenzied |
| hedge fund money in about 8,000 | | | | attraction to hedge funds actually is. |
| different hedge funds. They are under | | | | They are invested in a combination of |
| increasing pressure to be regulated | | | | derivatives, mergers and acquisitions, |
| after the largest collapse of a hedge | | | | selling short and some murkier deals in |
| fund ever, the Amaranth fund, which cost | | | | the "deregulated universe". The danger |
| investors over $6 billion. | | | | is, as predicted by some soothsayers in |
| The other big thing hitting the markets | | | | 2005, that some funds will over-leverage |
| is look-alike hedge funds, sometimes | | | | and take excessive risks and go bust. |
| called ARFs (Absolute Returns Funds). | | | | That is exactly what happened to |
| These are similar to what ETFs, Exchange | | | | Amaranth hedge fund that had a $6 |
| Traded Funds have been to mutual funds. | | | | billion plus blowout on the oil futures |
| ETFs are a basket of securities that are | | | | market. |
| often designed to mimic mutual funds, | | | | |