The investment strategy that governs hedge funds is such that the stocks can further invest in other broad ranges of securities including shares, debt and commodities. This is normally done with the aim of spreading the risk over a larger investment base. The other aim is definitely to increase or enlarge the return base. However, even with all these advantages, the stocks are faced with the challenge of having to pay higher fees for performance. The open ended nature of the stocks also makes it more vulnerable to risk unlike other investment ventures.
As earlier noted, the investments can fetch quite a lot in terms of the net asset value. The figures can run into many billions of dollars. The reason is that the management is much easier since the pool is only limited to a few investors, and hence it easily dominates the market. The risk is equally higher than that of other securities.
For an investor interested in hedge funds, a few things are worth noting. The investments are merely speculative and involve a lot of risk. They therefore call for an investor who has developed crocodile skin; one who will be able to take all in one stride in case he loses all that he has invested. The investments are also unregistered and do not offer any documents to investors. This tells you that proof of ownership may be hard in case of faulty operations.
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