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One negative aspect of non-regulation of hedge funds is fact that there are no official hedge fund statistics. Most hedge fund holders are large companies and so little is knows about their financial movements. Hedge funds are based in offshore jurisdictions, making them seem even more suspicious. Unlike mutual funds that have a base in large cities like New York, Hedge Funds are based in places like Bermuda, Cayman Islands, and Virgin Islands. It may seem strange to call your fund manager in Bermuda rather than to call someone in New York City.
Another negative aspect of hedge funds is their high price tag. Hedge funds seem to be more suited for large businesses and companies that are merging than they are suited for average worker. Hedge funds usually require an extravagant amount of money for initial purchase. If someone does have money, however, they can gain even more money with this sometimes high-risk venture.
Hedge funds have potential to help an investor gain quite a bit of money. However, hedge funds undergo a great amount of scrutiny because of lack of regulations and general secrecy surrounding hedge funds. Hedge funds are based offshore and have been rumored to hold as much as $665 billion. Some reports even state that at one point, 39 firms were managing hedge funds worth $1.1 trillion. These startling numbers show that hedge funds can be quite lucrative.
Jenny Delinga writes about a variety of financial topics, but prefers to write about hedge funds.