Standard fee for managing a hedge fund is around 2% (although that might change).
The way I understand it as a layman, is that the whole point of a hedge funds is that the firm managing funds is hedging investments taken out to limit risk of other investments (insurance is an example of a real-world hedge) on your behalf. The fee you pay as an investor is to the managing firm not to have to hedge bets yourself. They do it for you at 2%.
As a result, you are guaranteed a loss of 2% on your investment (in fees), hoping gains on returns will be above 2% putting you in a net positive (low risk, low return). If you invest yourself, you are not guaranteed any loss (0 fees) but you do risk a loss of anything up to and including 100% if you don't understand financial instruments well enough to hedge correctly (higher risk, higher reward).
I'm assuming that, in general, at 2% fees, investors gain on returns with hedge funds and this fund is pretty well par for the course in terms of fees. The remaining question is - does it yield higher returns than a conventional hedge fund?
It would be great to hear from someone from the industry, tho...
I'd like to know, too.
Standard fee for managing a hedge fund is around 2% (although that might change).
The way I understand it as a layman, is that the whole point of a hedge funds is that the firm managing funds is hedging investments taken out to limit risk of other investments (insurance is an example of a real-world hedge) on your behalf. The fee you pay as an investor is to the managing firm not to have to hedge bets yourself. They do it for you at 2%.
As a result, you are guaranteed a loss of 2% on your investment (in fees), hoping gains on returns will be above 2% putting you in a net positive (low risk, low return). If you invest yourself, you are not guaranteed any loss (0 fees) but you do risk a loss of anything up to and including 100% if you don't understand financial instruments well enough to hedge correctly (higher risk, higher reward).
I'm assuming that, in general, at 2% fees, investors gain on returns with hedge funds and this fund is pretty well par for the course in terms of fees. The remaining question is - does it yield higher returns than a conventional hedge fund?
It would be great to hear from someone from the industry, tho...