Investors and Hedge Funds Essay -- Business, Investment

Are hedge funds suitable for retail investors? There are many different reasons that mankind save and invest for. Generally, pension fund is the best choice for investors who are not keen to take risks. The pension fund is by far the highest number of investment that is low risk for many people. However, the pension fund is low return as well. â€Å"At annuity rate 8% of per annum (p.a.), a pension of  £20,000 a year requires a pension fund of  £250,000† (Redhead, 2008:1). In 1949, the first hedge fund was created by Alfred Jones. However, over the past 5 years, the expansion of the hedge funds is really incredible. According to the published statement, there was an increase in the number of hedge funds from 1,435 to 2,073 in 2005. Furthermore, in globally, the estimation of hedge funds is around 12,000 in 2006 (Strachman, 2007). Making a great deal of return in every market is an objective of hedge funds, that being able to make profit in any conditions whether positive, negative or stable. Hedge funds are usually a small private group which is suitable for wealthy people who accept high risk and keen to accept limitless liabilities for losses (Liang, 1999). The investment skills of the hedge funds managers may relate to the performance of hedge funds rather than market performance. Hedge funds use flexibility of investment strategy and style and also seek optimistic profits with irrespective to the way of markets. Short-selling, leverage and derivatives are often used by the managers of hedge fund. Flexibility, self-rule with admiration their investment plans and secrecy are desired by the most of hedge funds managers (Redhead, 2008:351). Shleifer and Vishny (1997) mentioned that the investors, invested in hedge funds, who ign... ...ured by kurtosis and skewnessâ€Å"(Redhead, 2008: 356). Gregoriou (2002) achieved with a survival study of hedge funds. It evaluates the possible life of whole and surely looks for the affected factors of the length of its life. He estimated that the mean life of them was 5.5 years. It also has several related factors which linked with long life such as large size, high returns low leverage, and low minimum purchase requirements. Because of poor performance was major cause to make the hedge funds be defunct initially. Baquero et al. (2005) also informed that great hedge funds with high returns were a reduced amount of result probable to pay a debt. As a result, investors who are investing with the hedge fund should deeply learn and concentrate on information of hedge funds’ life because the funds cannot be withdrawn throughout investment (Redhead, 2008:355). Investors and Hedge Funds Essay -- Business, Investment Are hedge funds suitable for retail investors? There are many different reasons that mankind save and invest for. Generally, pension fund is the best choice for investors who are not keen to take risks. The pension fund is by far the highest number of investment that is low risk for many people. However, the pension fund is low return as well. â€Å"At annuity rate 8% of per annum (p.a.), a pension of  £20,000 a year requires a pension fund of  £250,000† (Redhead, 2008:1). In 1949, the first hedge fund was created by Alfred Jones. However, over the past 5 years, the expansion of the hedge funds is really incredible. According to the published statement, there was an increase in the number of hedge funds from 1,435 to 2,073 in 2005. Furthermore, in globally, the estimation of hedge funds is around 12,000 in 2006 (Strachman, 2007). Making a great deal of return in every market is an objective of hedge funds, that being able to make profit in any conditions whether positive, negative or stable. Hedge funds are usually a small private group which is suitable for wealthy people who accept high risk and keen to accept limitless liabilities for losses (Liang, 1999). The investment skills of the hedge funds managers may relate to the performance of hedge funds rather than market performance. Hedge funds use flexibility of investment strategy and style and also seek optimistic profits with irrespective to the way of markets. Short-selling, leverage and derivatives are often used by the managers of hedge fund. Flexibility, self-rule with admiration their investment plans and secrecy are desired by the most of hedge funds managers (Redhead, 2008:351). Shleifer and Vishny (1997) mentioned that the investors, invested in hedge funds, who ign... ...ured by kurtosis and skewnessâ€Å"(Redhead, 2008: 356). Gregoriou (2002) achieved with a survival study of hedge funds. It evaluates the possible life of whole and surely looks for the affected factors of the length of its life. He estimated that the mean life of them was 5.5 years. It also has several related factors which linked with long life such as large size, high returns low leverage, and low minimum purchase requirements. Because of poor performance was major cause to make the hedge funds be defunct initially. Baquero et al. (2005) also informed that great hedge funds with high returns were a reduced amount of result probable to pay a debt. As a result, investors who are investing with the hedge fund should deeply learn and concentrate on information of hedge funds’ life because the funds cannot be withdrawn throughout investment (Redhead, 2008:355).