Hedge funds are an investment that uses pooled funds and various strategies on how to maximize the return. Hedge funds are known for being an aggressive investment strategy with active managers working to leverage both domestic and international hot markets.
The regulations by the SEC that cover hedge funds are the biggest part of what sets hedge funds apart from other investments like mutual funds. Because of the loose SEC regulations, those who want to invest in hedge funds typically have to become an accredited investor.
Hedge Funds Investment
Hedge funds are designed to target certain markets or sectors within a market that are showing potentially growth. These types of investments require a large up front sum of cash and have limited spaces available within the fund. When investing, you’re also expected to keep your money in the fund for a given period of time.
Some of the key characteristics of a hedge fund as described by Investopedia include:
- They’re only open to accredited or qualified investors
- They offer wider investment latitude than other funds (it can basically invest in anything under the sun)
- They often employ leverage (borrowed money maximizes their returns)
- They have free structure (management fees and performance fee)
What Firm Should You Pick?
When picking a hedge fund, you want to have a good idea when it comes to what you’re looking for. The highest performing funds can sometimes be the riskiest, so that might be something you want to consider before throwing the big bucks into a massive growth hedge fund. Investopedia has also identified a set of guidelines to consider when picking a hedge fund to invest in.
- Five-year annualized return
- Standard deviation
- Rolling standard deviation
- Months to recovery/maximum drawdown
- Downside deviation
Other than the financial aspect of the fund, you want to know that your money is in good hands when it comes to the managers that are going to be actively in charge of your money. Criteria you should look at include:
- The track record of the firm
- The fund and firm size
- The minimum investment that you have to put up to be a part of the fund
- The redemption terms, meaning how liquid your investment is
What Are Popular Hedge Funds Currently?
If you’re into investments, you might have heard about how lucrative things like bitcoin and block chain are. Ever since bitcoin made the news, crypto currencies have been popping up all over the place and investing in bitcoin has become a very common practice. While cryptos have no intrinsic value and no physical form, they have the potential for major return on investment.
Aside from trading websites and apps such as bitcoin revolution, there are various ways people are profiting from cryptocurrencies. For example, Stone Gate crypto hedge funds are some of the many funds out there that are focusing on investing in the digital money market. With a mission of creating widespread block chain technology innovation and integration while delivering above average returns and minimizing risk, StoneGate crypto hedge funds are doing exceptionally well.
The funds that StoneGate offers include:
- Stonegate Diversified Digital Asset Master Fund
- Stonegate Octic All-Weather Blockchain Fund
- Stonegate SoHo Total Return Fund
- Stonegate Pollinate Cyptocurrency Fund. It may be in your best interest to do some research so you have a better understanding of this industry and then you can make a better decision now that you know a bit more than before.
- Stonegate Berkley West Arbitrage Fund
- Stonegate BlueFlame HealthCare Venture Fund
Each fund uses unique tactics and techniques to realize the greatest return possible while balancing the risk accordingly. Like most other hedge funds, Stone Gate Digital requires the investor to have a high net worth or be an institutional investor.
Also Read: How to Start Your First Investment Plan
Morgan Stanley estimated that hedge funds invested $2 billion in bitcoin and other crypto currencies in 2017. 84 crypto currency hedge funds were established last year and out of an index of 24, they rose almost 3,000% within the year. The market is of course very volatile, but has the potential to grow astronomically. In order to reap the benefits of the potentially very lucrative crypto market, you have to have skin in the game.
It’s best to educate yourself on the competing hedge funds before deciding on one. There is a lot to consider when it comes to playing with the amount of money that’s needed to invest in a hedge fund.