Webcast & Podcast

Due to the high risk and the large amount of money required to enter a hedge fund, this type of investment is only suitable for institutional or large investors. In addition, every hedge fund is associated with a high investment risk, which can extend beyond total loss. Therefore, private investors should not necessarily invest in hedge funds.

A weakened form of hedge fund investment is offered by so-called hedge funds of funds. These are funds that in turn contain various hedge funds. The risk can be reduced by diversifying the various investment strategies and forms.

However, in this case investors also have to expect higher fees than those payed for trading CFDs in https://exness-ar.com/login/, which have to be paid to the hedge fund manager of the individual funds as well as to the manager of the fund of funds.

Difference between investment funds and hedge funds

Hedge funds and investment funds are investment portfolios that are managed by an external provider. This fund manager puts together various securities as a fund that, according to his calculations or experience, produces the best possible performance. Investors then buy fund shares and share in both profits and losses.

However, there are significant differences between the two forms of investment:

Hedge funds  

• Aim for absolute and positive returns 
• Are only lightly regulated 
• Borrowing is possible for fund stocking 
• Investments can usually hardly be liquidated 
• Fund manager receives performance-based remuneration of up to 25 percent of the return 
• Short selling possible 
• There are hardly any investment restrictions 
• Unsystematic risk 
• Use of derivatives almost unlimited 
• Success depends on the luck or expertise of the fund manager  

Investment funds

• Are regulated
• Aim to outperform the market as a whole
• Can theoretically be liquidated at any time
• Can theoretically be liquidated at any time
• Manager's remuneration depends on fund volume and relative performance
• Strong regulation of the investment
• Only purchases possible
• Success depends on the development of the market as a whole
• Systematic risk
• Use of derivatives is prohibited

Return and risk

One of the greatest risks of a hedge fund is that its success depends on the respective investment strategy as well as on the calculation models of the hedge fund management. For this reason, hedge funds are usually referred to as a "bet" by the shareholder. For with the chance of high profits also comes a frequently incalculable risk.

Every hedge fund carries the risk of a total loss.

To minimise the risk, private investors are therefore only allowed to invest in funds of funds that integrate up to 20 different hedge funds. Here, returns between three and six percent are possible.