Hedge Funds have always been sweaty for investors and seldom have fared well in the market over the past few years. Recent Wall Street Journal reports ascertain that confidential information had been passed by a group of people who were into hedge funds and then fell under the scanner of the Federal Bureau of Investigation (FBI). People of this group were taken in for questioning by Federal Bureau of Investigation (FBI) this Wednesday and as per the investigations, the FBI projected their gross profit to a staggering $ 61.8 million.
Investing in hedge funds has always forced investors to think twice as this venture has always come with its own share of risks. The gross return from the hedge funds has always been lucrative for the managers heading hedge funds along with their associates. Hence the profit turnover for these people has always been first-rate due to the standard structure of compensation consisting of 2 percent of the total assets along with profits of twenty (20) percent. Thus the probability of resorting to illegal means of earning profits is always high due to such an emblematic and archetypical compensation structure fixed for hedge funds.
A positive advancement in hedge funds doesn’t necessarily guarantee profitable returns as the chances of surpassing the comparable indexes are rare. Analysis of hedge funds this year has revealed that domestic indexes choked the HFRX index and the gross of hedge funds has also been considered in conflict with diversified portfolios. Pension plans have 60 percent of stocks on the whole along with 40% bonds for all the other investors.
Hedge funds habitually advertize flexibility of asset control and this is considered as an advantage for them but risk is always there.
Thus before investing in hedge funds one needs to be well prepared of the consequences and keep their fingers crossed.
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