Hedge Funds

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Understanding Hedge Funds

Hedge funds are generally reserved for investors that are serious about investing — and for those with significant assets to back that up. Put simply, a hedge fund is a partnership of investors run by a manager, typically the person who started the hedge fund. Hedge funds are similar to mutual funds, only they operate on a much larger scale and they aren’t regulated by the U.S. Securities and Exchange Commission.

When it comes to hedge funds, the “two and twenty” fee structure is common. This means that the manager earns 2 percent of the funds, regardless of performance. In addition, the manager earns 20 percent of the return on investments each year.

Those who invest in hedge funds are playing with big money — meaning they can make millions of dollars on these types of deals. However, because so much money is involved, that means you have to have money to make money. Learn more here at GOBankingRates.