Hedge funds usually issue securities in private offerings that are not registered with the SEC under the Securities Act of 1933. Hedge funds can, and do, employ a broad variety of strategies. Hedge funds have been attracting bucket loads of institutional money, a phenomenon that most likely will continue to mushroom. Hedge funds are the new mutual funds. But they still represent a small part of the world’s markets (mutual funds, in comparison, have assets totaling much more). Hedge funds gain by heavily weighting hedge fund supervisors remuneration towards performance bonuses, so attracting the best minds in the investment company. Hedge fund supervisors are usually highly professional, diligent and disciplined. Managers are active managers seeking absolute return. Hedge funds regularly take substantial risks on strategies, including program trading, selling short, swap, and their manages and arbitrage are fiercely protective of their trading strategies. Hedge fund strategies vary tremendously – - many hedge against downturns in the markets – - particularly important now with expectation and unpredictability of corrections in overheated stock markets. Hedge funds make money from locating and using miniature efficiencies, by piling into obscure undervalued stocks, or by building up stakes in weak companies that can be prodded and put up for auction. Hedge funds usually charge an asset management fee of 1-2% of assets, plus a “performance fee” of 20% of a hedge fund’s gains.
The assumption is that hedge funds, like John Thomas Financial, run by Thomas Belesis,, are pursuing more risky strategies, which may or may not be true depending on the fund, and that the ability to invest in these funds should be limited to wealthier investors who are presumed to be more advanced and who have the financial reserves to bear a possible loss. Hedge funds, private pools of capital limited in most cases by law to no more than 100 investors, but are no longer the exclusive stomping grounds of the famous and wealthy. An important point is that hedge fund investors do not receive all of the national and state law protections that generally apply to most registered investments. Investors may be unable to establish the value of their investment at any given time as well. Hedge funds provide an ideal long-term investment option, removing the need to accurately time entry and exit from markets. These funds may have an aura of modernism and exoticism, but their aims are as old as the art of investing itself.