It's tough to compare hedge funds to the S&P 500 because there are so many different types of hedge funds, and the markets they invest in might be global-oriented, says Chris Berkel, investment adviser and founder of AXIS Financial. This form provides information about the fund, including any conflicts of interest or past disciplinary actions. You can use the SEC's Investment Advisor Public Disclosure (IAPD) website to check the manager's ADV Form. Quick tip: Thinking about investing in a hedge fund? Start by researching the fund's manager, investment strategies, and past performance. For instance, the fund may borrow money to grow returns - known as leveraging - make highly concentrated bets, or take aggressive short positions. They can invest both domestically and around the world and use just about any investment strategy to make active returns. Hedge funds have a lot of leeway in how they earn money. The hedge fund will also have a minimum buy-in. Quick tip: To invest in a hedge fund, you'll need to show you've earned at least $200,000 in each of the past two years ($300,000 for married spouses) or you've got a net worth of at least $1 million. This is actually where the term "hedge" comes from, since using various market strategies can help offset risk, or "hedge" the fund against large market downturns. If one investment does well, then the other loses money - theoretically reducing the overall risk to investors. To protect against market uncertainty, the fund might make two investments that respond in opposite ways. What is a hedge fund?Ī hedge fund is a private investment that pools money from several high-net-worth investors and large companies with the goal of maximizing returns and reducing risk. But hedge funds come with some risks, which you'll need to consider before diving in. The goal is for participants to come out ahead no matter how the overall market is performing, which may help protect and grow your portfolio over time. By clicking ‘Sign up’, you agree to receive marketing emails from InsiderĪs well as other partner offers and accept ourĪ hedge fund is a type of investment that's open to accredited investors.
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