2007-02-22 11:46:33 · 3 answers · asked by Bobby K 1 in Business & Finance ➔ Investing
A hedge funds uses various strategies to reduce overall volatility in a portfolio and hedge against market downturns.
Because hedge funds use unconventional philosophies, and are meant to be used to complement an overall portfolio strategy, one may only invest in hedge funds if he fits the SEC definition of an accredited investor. Per Investopedia, that is someone who meets at least one of the following criteria:
1) earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.
2) have a net worth exceeding $1 million, either individually or jointly with his or her spouse.
3) be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.
2007-02-22 12:05:21 · answer #1 · answered by Rob D 5 · 1⤊ 1⤋
A hedge fund is allowed certain investment strategies that common financial institutions can't do because of the law.
They may short sell, sell completely, speculate on commodities, and do arbitrages, to name a few.
US hedge funds are opened only to a maximun of 99 accredited investors (those that have $2.5+ million net worth and earn $200k+ per year.
They normally charge 1% management fee and 20% of the profits.
They may not advertise.
2007-02-22 20:05:23 · answer #2 · answered by Carlos G 3 · 1⤊ 0⤋
A Mutual Fund that can sell short stocks.
2007-02-23 03:00:42 · answer #3 · answered by Anonymous · 0⤊ 2⤋