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How does a hedge fund differ a mutual funds?
Hedge funds and mutual funds are both managed portfolios in which the securities are picked by a fund manager. The securities that are picked are the ones that the manager feels will perform well and are grouped into a single portfolio. Portions of these funds are then sold to investors who are allowed to participate in the gains and losses of the holdings. However hedge funds are more aggressively managed as compared to mutual funds. They can take speculative positions in derivative securities such as options and can also short sell stocks which will increase the leverage of the fund. This means that hedge funds can also make money in an economic downturn. Mutual funds in comparison cannot take such leveraged positions and do not involve the same level of risk. Hedge funds also differ from mutual funds in their availability. They are only available to a specific group of investors with high net worth while mutual funds are available to any investors with even minimal amounts of money. There are a number of investment companies in India that invest in hedge funds as well as mutual funds of which Reliance mutual funds is a very good option.
How does a hedge fund differ from a mutual fund?
Hedge funds and mutual funds are both managed portfolios in which the securities are picked by a fund manager. The securities that are picked are the ones that the manager feels will perform well and are grouped into a single portfolio. Portions of these funds are then sold to investors who are allowed to participate in the gains and losses of the holdings. However hedge funds are more aggressively managed as compared to mutual funds. They can take speculative positions in derivative securities such as options and can also short sell stocks which will increase the leverage of the fund. This means that hedge funds can also make money in an economic downturn. Mutual funds in comparison cannot take such leveraged positions and do not involve the same level of risk. Hedge funds also differ from mutual funds in their availability. They are only available to a specific group of investors with high net worth while mutual funds are available to any investors with even minimal amounts of money. There are a number of investment companies in India that invest in hedge funds as well as mutual funds of which Reliance mutual funds is a very good option.
What does it take to start up a hedge fund?
Similar stock or commodity with oposing expected valuation. It takes a team, a marketing plan, seed capital, and operating capital. It takes a lot of capital and most hedge funds never grow into long-term viable businesses. Personally I believe that there will be hundreds of new hedge funds started every year for the next 7-10 years. Institutions are by and large increasing their allocations to these products and the surveys of the ultra-wealthy and high net worth financial advisers show a strong sense of confidence in increasingly using alternative assets within their portfolios. Soon I will start writing more often on exactly what financial advisers, family offices and institutions look for in hedge funds because if you work in the industry you will probably be interested in working for a hedge fund that is positioned for growth and if you invest in them I hope that you will contribute to the ongoing conversation here within this hedge fund blog and hopefully I will uncover at least one useful resource for you or your clients.
What's the difference between hedging and hedge fund?
Hedging is a general concept also which is made popular by the term "Hedging your bets". This is often done by betting on 2 opposing situations thereby turning a profit regardless of the outcome. In finance a "hedge" is often accomplished by both shorting a stock and buying options to hedge yourself in the chance that the stock goes up. A hedge fund is an unregulated investment fund that are popular amongst high-net worth and institutional investors. Hedge funds are different from mutual funds because they are not regulated, the hedge fund manager has the ability to buy and sell all types of assets, betting on rise and falls of securities.
What is the difference between hedging and hedge fund?
Hedging is a general concept also which is made popular by the term "Hedging your bets". This is often done by betting on 2 opposing situations thereby turning a profit regardless of the outcome. In finance a "hedge" is often accomplished by both shorting a stock and buying options to hedge yourself in the chance that the stock goes up. A hedge fund is an unregulated investment fund that are popular amongst high-net worth and institutional investors. Hedge funds are different from mutual funds because they are not regulated, the hedge fund manager has the ability to buy and sell all types of assets, betting on rise and falls of securities.
Difference between venture capital fund and hedge fund?
Investing takes many forms, from simple to complex, safe to risky. If you have money you want to put to work, you should first prepare by researching the many different strategies available. For investors with a large amount of capital, hedge funds and venture capital are two popular options.Hedge FundA hedge fund is a pool of investment capital that a manager invests on shareholders' behalf. In this basic operation, a hedge fund is similar to a mutual fund, but with a crucial difference: the complete discretion it gives the fund manager to invest where and how he chooses. This means hedge funds can hold any and all investment types, from the safest U.S. Treasury bond to the riskiest junk bonds, stock options and futures contracts. Entrance FeeHedge funds have much higher minimum investments than ordinary mutual funds and place greater restrictions on withdrawals. Some hedge funds require you to stay invested a minimum of a year or more to avoid a run on the fund that could force it to liquidate its investments. Hedge funds tend to be riskier than mutual funds, and it can be difficult to ascertain how much their holdings are worth. Because hedge funds are not regulated by the SEC, potential investors must thoroughly research the performance and management before entrusting their money to a hedge-fund manager. Venture CapitalA venture fund takes a more active role in its investments. It allows investors -- individuals as well as institutions -- to invest money in new companies and enterprises. The fund pools money from its partners and buys a share in companies that do not yet have the finances or history to successfully offer shares on the public stock exchanges. In exchange, the venture fund earns a share of the company's future earnings, if any, and its partners divide the proceeds according to their participation in the fund. Venture Fund Risk and ReturnVenture funds represent a high-risk, high-return investment for their partners. Many companies in which a venture fund invests do not yet have sales or profits, and some stand for only a concept or invention that has not yet been brought to market. Members of a venture fund may take an active role in the operation of the new company, taking seats on its board of directors or providing active advice and guidance. Once the company makes an initial public offering, the venture fund sells its stake and divides the proceeds to its own partners.
How do you start your own hedge fund?
Assuming you don't already have connection to seed capital, according to many of the wisest, and most successful hedge fund managers in the world, the fastest, and most realistic way, is to first start your own business, make enough seed money (25M) minimum to start your on proprietary fund (many legal ways to easily create the actual hedge fund) implement your particular investment objective (macro, arbitrage, long/short, etc.), string together a 5 year market beating track history, and the money will find you. Pick up a copy of Hedge Hogging by Barton Biggs and Inside the House of Money by Steven Drobny for recent accounts of the inside goings on and the challenges of raising money without "connections" Hedge Fund Seed Capital Hedge Fund Seed capital is the money a hedge fund tries to raise to launch or within it's first year of operating to try to "get it off the ground" and hopefully raise enough assets to appear respectable to initial investors and provide initial momentum towards breaking even as a business. Hedge fund seed capital is in high demand, there are literally hundreds of investment groups looking for it right now and only three or four handfuls will receive any significant amount of it. Some hedge funds are seeded with as little as $500,00 while others receive up to $350M. From my experience I would guess that 68% of first year hedge fund seed capital levels range from $3M to $25M. * Hedge Fund Seed Capital Source #1: High Net Worth individuals (accredited investors) who are familiar with your trading skills, past portfolio management experience, or clearly understand your competitive advantage in the marketplace.* Hedge Fund Seed Capital Source #2: Family & Friends who are accredited investors.* Hedge Fund Seed Capital Source #3: Private Equity Firms. Many private equity funds have jumped into the space of seeding hedge funds and many will in turn work on raising assets for your fund once it will benefit both your fund and themselves. * Hedge Fund Seed Capital Source #3: Hedge Funds. Some hedge funds have huge amounts of free cash flow and are looking for ways to re-invest it within strategies they understand and do not directly compete with products that they plan to create on their own.
What is the difference between hedge funds and mutual funds?
Mutual funds and hedge funds both pools investor's money into one larger, centrally-managed set of assets. The main difference is in legal structure and regulation. In the US, mutual funds are heavily regulated by the Securities and Exchange Commission (SEC). Because they are unregulated, hedge funds are not open to the general public. The US government only allows high net worth individuals and institutional investors to invest in them. Before 2005, the SEC did not regulate hedge funds at all. Their freedom is now being curtailed. The SEC is now asserting some regulatory power. In the UK, the Financial Services Authority already exercises much more oversight. This is driving hedge funds overseas. In the US, Mutual funds are investment companies that must register with the U.S. Securities and Exchange Commission and are subject to strict regulation under four federal laws: the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act. Hedge Funds are not considered to be investment companies, and are thus excluded under the federal securities laws. This may be because of the private nature of their offerings or the financial means and sophistication of their investors (e.g., investment funds with no more than 100 investors and private investment funds whose investors each have a substantial amount of investment assets - $5 million minimum for some funds under Investment Company Act of 1940). Thus, unlike Mutual Funds Hedge Funds do not have to face: * periodic reports under the Securities Exchange Act of 1934; * regulations on the structure and operation of funds; * NASD rules limiting sales charges and other distribution fees that need to be presented in comparable and standard form (e.g., expense ratios); * restrictions on ability to leverage or borrow against the value of securities in its portfolio, which practically eliminate the ability to buy on margin and sell short; * requirements to value portfolios and price their securities daily based on market quotations; * requirements by law to allow shareholders to redeem their shares at any time; * requirements regarding a fund's portfolio diversification and its distribution of earnings; * NASD oversight of fund advertisements and other sales materials; * the need for majority of independent directors who are responsible for extensive oversight of the fund's policies and procedures.
Why you need time value of money in analyzing fund flows?
Because a dollar received in the future is worth less to you than a dollar available to invest today. The further in the future you receive funds, the less is their value to you today.
Is the investment of mutual funds risky?
Yes they are. Since mutual funds invest in the stock market they carry the same risk that stock market has. If the price of stocks tumbles due to some reason, the value of a mutual fund goes down and hence our investment worth also goes down. Certain type of funds like debt funds and balanced funds do not bear the brunt of a stock market collapse but they suffer losses too, during an economic crisis.
What is the definition of a hedge fund?
A private investment vehicle whose manager receives a significant portion of its compensation from incentive fees tied to the fund's performance -- typically 20% of annual gains over a certain hurdle rate, along with a management fee equal to 1% of assets. The funds, often organized as limited partnerships, typically invest on behalf of high-net-worth individuals and institutions. Their primary objective is often to preserve investors'capital by taking positions whose returns are not closely correlated to those of the broader financial markets. Such vehicles may employ leverage, short sales, a variety of derivatives and other hedging techniques to reduce risk and increase returns. The classic hedge-fund concept, a long/short investment strategy sometimes referred to as the Jones Model, was developed by Alfred Winslow Jones in 1949.
A sparrow in the palm is twice as valuable as a couple in the hedge?
A bird in the hand is worth two in the bush.
