Among the numerous investing options available, Hedge funds are one of the ideal ways, says expert in the subject Scott Tominaga, to secure one’s hard-earned money for the future. In reality, hedge funds are the tools for investment and not an investment in themselves. This concept is like a pool, wherein several individuals put in their money. This money is then taken by the funding agency and invested in the market into businesses that yield high returns.
This is not like the mutual funds where the masses invest and it is closely monitored. Unlike the mutual funds, the hedge funds also do not entail with them a high risk of loss. Hedge funds cater mostly to the elite class and big investors, because the fee for the manager of a fund such as this is rather high.
The various categories in which the hedge funds invest include: private equities, long-only equities, real estate, trade junk bonds, patents or even copyrights of music. They deal in high-end profits and with high-end clients in the form of individuals and businesses who are ready to invest large sums of money.
Initially the hedge funds were structured in a way that the investor would not have to suffer any loss, irrespective of the fact that the market went up or down. This is how it got its name as ‘hedge’ as it hedged the investors as far as possible from risks. Later, however the concept evolved and it began including other arrangements for capital as well but the name remained the same informs Scott Tominaga.
A hedge fund manager gathers all the capital and invests in the best possible option available in the market. The terms and conditions of the fund should mention the strategy that would be employed to make the investment. The fee structure and the operating mode should all be mentioned in the policies. They generally charge a fee of 1 or 2% for management and a 20 % for the annual profit that an investor makes. The remaining amount stays with the investor entirely as the gains of the investment.
The hedge funds, according to experts in financial management such as Scott Tominaga can be classified as fixed-income arbitrage and event-driven investing. The style of investment of the fund manager is what helps in its classification. An investor has to keep the money in the fund for a minimum of one year, this tenure is known as the lock-up period.
The reason one ought to consider investing in hedge funds is owing to the latitude it covers. It is not stipulated to any particular category for investment; it could invest in any business or individual where the returns are steep. Researches reveal that the hedge funds have gained impetus in the recent past and are here to stay. They serve as a great investment tool if one has the aspiration to get optimal profits even though they have to shell out a little extra from their pocket.