Registered Hedge Funds: Retail Investors Enter the Marketplace

Anson, Mark
August 2003
Journal of Financial Planning;Aug2003, Vol. 16 Issue 8, p62
Academic Journal
This article presents an overview of where hedge funds fall within the U.S. securities laws, including a discussion of the safe harbors employed by most hedge funds. Hedge fund managers tend to seek out arbitrage or mispricing opportunities in the financial markets using a variety of cash and derivative instruments. Their investment styles are alpha-driven rather than beta-driven. Hedge funds are generally treated as investment companies under the U.S. Investment Company Act of 1940. A Section 3(c)(1) fund may sell its securities or partnerships interests to no more than 100 investors. A qualified purchaser is any institutional investor with $25 million in discretionary capital or any individual with at least $5 million in total assets--essentially a high net worth investor. In contrast, a registered hedge fund can offer its securities to as many investors as it wants. This means that the registered hedge fund is subject to regulatory audits by the Securities and Exchange Commission (SEC). All mutual funds that sell their securities to retail investors must file a prospectus with the SEC before they offer their securities for sale. Incentive fees are mainstay of the alternative asset investment universe. The typical fee structure for most hedge funds is one and 20--that is, a one percent management fee and a 20 percent incentive fee. One potential disadvantage of a registered hedge fund is the lack of liquidity associated with an investment in a closed-end mutual fund because, by definition, it does not issue redeemable shares.


Related Articles

  • Fund Industry Nervous as SEC Mulls Anti-Timing Reg. Amend, James M. // American Banker;3/24/2006, Vol. 171 Issue 57, p7 

    This article reports that despite the mutual fund industry's best efforts, it does not appear the haze surrounding the Securities and Exchange Commission's controversial redemption fee rule is about to clear. The mandate is meant to discover instances of market timing that might be illegal or...

  • SS&C GlobeOp Forward Redemption Indicator Down for April.  // Global Custodian News;2014, p118 

    The SS&C GlobeOp Forward Redemption Indicator (FRI) for March 2014 measured at 3.23%, down 3.81% from March.

  • SS&C GlobeOp Forward Redemption Indicator Down for April.  // Global Custodian News;2014, p104 

    The SS&C GlobeOp Forward Redemption Indicator (FRI) for March 2014 measured at 3.23%, down 3.81% from March.

  • Hedge Fund Assets Lowest Since 2006. Jones, Dow // American Banker;1/22/2009, Vol. 174 Issue 14, p9 

    The article reports on a decline in hedge fund assets and the hedge fund industry. The author suggests that high-profile funds liquidated or froze redemptions and assets for arbitrage and event-driven funds experienced a decline. Other topics include slumping performance, increase in inflows,...

  • Hedge fund redemption spree doesn't scare U.S. institutions. Williamson, Christine // Pensions & Investments;8/8/2005, Vol. 33 Issue 16, p14 

    The article reports that large redemptions and the closing of a few well-known hedge funds have had minimal impact on the U.S. institutional investors and their favored hedge fund-of-funds managers. Timothy Jackson, a partner and hedge fund specialist at consultant Rocaton Investment Advisors...

  • Redeem and revoke.  // Pensions & Investments;4/28/2008, Vol. 36 Issue 9, p10 

    The article reflects on the significance of "revocation option" for investors in hedge funds of funds. These funds often allow redemptions by investors if they give advance notice of 60 or 90 days. The funds, however, give investors an option to revoke their redemption notices. It is stated that...

  • Liquidity hunt hits managers. Williamson, Christine // Pensions & Investments;11/10/2008, Vol. 36 Issue 23, p1 

    The article reports on an increase in redemption requests from hedge fund investors in the fourth quarter of 2008 in the U.S. According to a poll of hedge fund and fund-of-funds managers conducted by consultant Rocaton Investment Advisors LLC, most hedge funds received redemption request for 10%...

  • Hedge Fund Redemption Requests Fall in September, Finds SS&C. Safane, Jake // Global Custodian News;2014, p1 

    The article reports on the decline of hedge fund redemption requests in September 2014, according to the GlobeOp Forward Redemption Indicator of SS&C Technologies Holdings Inc., provider of software to the global financial services industry.

  • Redemption requests bode ill. Williamson, Christine // Pensions & Investments;12/8/2008, Vol. 36 Issue 25, p3 

    The article focuses on the loss that hedge fund managers could suffer due to redemption of assets by investors by the year-end. The managers may lose upto one-quarter of their assets due to the redemption requests which average between 20 percent and 25 percent of assets for the majority of...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics