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Hedge Funds Bushwhacked By Volatility

RiskWerk

Every so often we see an advertisement for a new hedge fund that holds out the possibility (but not the guarantee) of taming market volatility by taking long and short positions simultaneously in baskets of stocks. The schema (not to use a more familiar term) is that the long position can be financed by the investor cash and the cash that is realized on the short positions and the hedge fund manager charges “only” two or three percent on the capital, optional front- or back-end loads (one or the other or both) and twenty percent of the portfolio gains, should there be any. The manager can even go over the top by leveraging the long position with debt or the margin account and, guess what, who pays for all of that? After all, the “sophisticated” and well-heeled investor with $1 million or more to “invest” did give them their money…

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About Nicholas Maithya

I am a writer focussing on disruptive technology, Fintech, Big Data and Internet of Things, Online Marketing trends, and investments. When I am not writing about these, I am probably in the gym working out, out and about with family, watching the news (basically business/technology) or soccer. That's why I do sometimes cover soccer-related stories.

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