Hedge Funds

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language Discuss and summarise the pros and cons of hedge fund vehicles

May use examples from HF industry to support your arguments . show the reference as (author , year ) in the essay and a list at the end .Introduction

Hedge funds can be defined as another kind of mutual funds . Hedge funds are collected in the form of money from investors and it is used to purchase stocks or bonds . The term `hedge fund ' is US-based and generally hedge funds

are invested by overseas customers . Hedge fund may take a long term position or short term position in a particular depending on the beta which means if the beta is close to zero that particular stock will remain unchanged for a period of time due to rapid market movement

For example , if two stocks e .g . Garnier (skin care products ) and Revlon (cosmetic ) are purchased with hedge funds whereas the beta is close to zero . Presumably , Garnier moves up by 10 per cent , and Revlon and the broad market move up by 7 percent . The overall funds netgain is 3 per cent

Hedge funds are very safe , security-specific on return on investments Large amount of funds can be collected , borrowed and invested in stocks whereas efficient portfolio management is what is required in to handle hedge funds . Hedge funds have a lower market risk

In accordance with the rules of U .S SEC , hedge funds are not required to be registered with SEC Act 1934 whereas hedge funds carry a similar prohibition against fraud and malpractices and also similar fiduciary responsibilities of managers as in other investments

The definition of SEC for hedge funds is A fund of hedge funds is an investment company that invests in hedge funds -- rather than investing in individual securities . Some funds of hedge funds register their securities with the SEC

SEC also cautions and clearly instructs investors to consider accurate information before making investment into hedge funds . A complete set of guideline is provided in SEC for the benefit of investors and also to be aware of provisions and rules in SEC for hedge funds . Some of the important points for investors are (1 ) To read prospectus and MOA (2 Understand how hedge funds assets are valued (3 ) Limitations (4 research and background of hedge fund managers (5 ) Protections on purchase of hedge fund (6 ) How to launch a complain about hedge fund etc

According to Hedge Fund Research in 2005 there were 848 fund closures out of 2073 funds launched in the year 2005 and comparing to the year 2004 1435 funds were launched with only 296 closures . Morgan Stanely report states that top 200 hedge funds are managing 90 per cent of asset management and the rest 50 top hedge funds control only 40 per cent of assets under management . Morgan Stanely report also states that average returns on traditional hedge funds have begun to decline as more...