How do hedge funds work?

24th Nov 2009 by Daniel Cross, ChFC

Hedge Funds work by pooling together many investors' money and having it managed relatively unregulated by as little as one Hedge Fund Manager. The manager can then make investments and trades that most people do not have access to simply by measure of sheer size. They make money on a principle known as 1 and 20. This means that the Fund will charge a 1% management fee and a 20% bonus fee for profits made over a certain threshold; usually the 10 year bond rate.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com