1) The required minimum investment is smaller for fund of funds compared to hedge fund.
2) Diversification results in lowering of risk
3) Negotiation for reduction of fees payment.
4) Analysis of investing portfolios may help in investing in good company portfolios
5) Agreements to get access to capacity of Hedge fund Types of Hedge Fund Investor
Risk tolerance, investment horizon, investment objectives, and investment restrictions differentiate the investors in investing. Taxation also differentiates them.
INDIVIDUAL INVESTORS
These investors form the major part in hedge funds when US is considered. Their preference …show more content…
These include 529 plans and Coverdell Educational Savings Accounts (ESAs). These help in saving deductible income. It is similar Roth IRA in saving tax from ordinary income.
Retirement Savings Plans (RSPs)
There are two provisions that limit the movement into hedge funds. One was that no more than 20 % can be invested in foreign assets and other is the restriction to invest into private investments.
Restrictions on Retirement Fund Investing
1. Owner of the IRA must be eligible.
2. Owner must find a way to effect the investment.
3. Owner must cope with the hedge fund industry that is reluctant to take IRA.
4. Hedge funds restrict IRA’s to 25% to avoid being labeled as a pension fund.
Non-accredited Investors
These are the investors who do not have sufficient income or net worth but knowledgeable investors. A maximum of 35 non accreditors can be taken into funds. Non accreditors maybe seeking for higher returns, lower risk or low correlation to other assets
FAMILY OFFICES
It is created for a group of individuals who have common interest. It is more famous as a way for families a s a whole. Members of this group may hire a business unit to manage their funds. Risk and return are the