About hedge funds:
Ø Not regulated by SEC (Stock exchange Commission)
Ø Can’t Market themselves
Ø Based on certain networks to raise the fund
Ø Huge fund size
Ø Especially for the large scale investors who wants to take high risk with high returns
Ø Better Management comparisons with Venture capital or private equity
Ø Charges management fee and high performance fee
Ø Its open ended fund in a certain point
Structure of Hedge funds:
It’s simply like a Mutual fund with small no of share holders. This fund is accumulated through the strong personal network. Fund is managed by expertise Management Company. Management Company gets management fee on net value of the fund and high performance fee on profit. Share holders can sale their share in a certain point like open end fund. Very sophisticated investor invests in hedge fund. There is huge secrecy in investing the fund. Fund manager have the choice of investing the fund anywhere. Usually they invest in liquid assets.
Some hedge funds Activities:
Long short hedge
Most often, hedge fund shorting stock in the stock market with their expertise knowledge. Moreover they make combination of buying and sorting the stock which is called long short hedge.
Merge Arbitrage
Usually when companies are merging each other, hedge fund play merge arbitrage to get maximizes benefits. They play in the stock market during acquisition of any company.
MBS (Mortgage Back securities)
Hedge funds buy mortgage back securities (MBS) which is lowest trance of security. They also invest in CDOS (Collateral Debt obligation securities). These low trance securities are highly risky but give high returns.
Hedge fund can do any type of fancy investment as they are not regulated by the SEC
