Administrators
They provide services of operations, accounting, and valuation.
Distributors
They basically deal with distribution of securities. A distributor can be an underwriter, dealer or broker.
Investment strategies adopted can be classified as:
• Discretionary/Qualitative: These are strategies selected by the general partner or fund manager.
• Systematic/Quantitative: These are strategies suggested by a computerized system.
Characteristics of Hedge Funds:
• Available only to accredited investors
Investors need to have a certain net worth before investing in Hedge funds.
• Variety of Investment Options
It can be invested in various areas such as land, real estate, stocks, derivatives, currencies, etc.
• Use leverage
Borrowed money is often used to enhance returns.
• Fee
They charge a management fee and performance fee.
The main benefit of investing in Hedge funds is that the risk is lower than other types of investments. They can be said to be uncorrelated with market indices. However, the fact remains that they are prone to some amount of risk. Hence, it is a good approach to be aware of all the potential risks before investing. It is also essential to select a fund manager who is experienced in the field.
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