HomeCollege FundingAlternative OptionsHedgefunds
Hedge Funds
 

Alternative Options

  Mutual Funds
  401k Loans
  EE Bonds
  Tax Credits
  Hedge Funds
   
fast facts
Only 15-20% of funds invested in hedge funds come from individual investors, with the majority coming from pension and institutional funds.

Hedge Funds typically charge management fees plus a percentage of profits.
Latest Blog Entries
Attention Parents: What About You?
Avoid the UGMA Kiddie Tax for 18 to 23 years olds by taking action prior to January 1, 2008
The Campus-Community Connection: Understanding Service Learning

hedge funds

Hedge funds are a different animal, since only accredited investors can invest in them.  They are typically aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).  If you are an accredited investor, hedge funds might be a good alternative investment to consider for education planning.  Click here to receive more information about the 401kid Preferred Alternative Investment Vendors.

In 2005, 401kid CEO, Arman Rousta, interviewed Greg Frith, Portfolio Manager for FBS, a Pennsylvania-based Hedge Fund, about the differences between mutual funds and hedge funds.  Frith highlighted the key differences and gives investors who are interested in hedge funds the following advice.


Rousta: What advice do you have for investors who are interested in hedge funds?
Frith: Do your homework.  I can’t say that enough.  Every hedge fund is unique.  Hedge fund investing is very different from mutual fund investing and does require more time and effort.  If the hedge fund manager can’t answer any of the following questions, don’t invest in the fund:

  1. What is your investment strategy?
  2. Can you give me a few examples of past trades?
  3. What is a current trade that you have invested in?
  4. What is your best / worst monthly return on record and what influenced these returns?
  5. Are there certain types of market / economic conditions that influence your returns for the better / worse?
  6. Does your fund employ leverage? If yes, how much?
  7. Does your fund utilize derivatives?
  8. Do you employ a risk manager?
  9. Can I have access to your auditor to obtain an audited performance record for the last three years?
  10. Who is your auditor? 
  11. Does the auditor have independent access to all of your records (current and historical)?
  12. Can I receive a copy of your prospectus?

The answers to these questions should, at the very least, give a prospective investor an initial feeling if the fund is a viable investment option.  Good luck and happy hunting.
To read the transcript of the interview, which answers many of the commonly asked questions about hedge funds, click here