Hedge Fund is a word you might have read in the news papers. They are mutual cousins to the Mutual fund community in many ways. There are 2 differences First they work like a Mutual fund but on a larger scale in terms of money, Second there pay system to Fund Managers is different. Lets leave out the first one and come to the 2nd one the pay to the Managers. An astonishing fact about mutual fund is their payment system is an fixed Fees irrespective of his performance. So even if fund goes down by 85% the pay to the managers is fixed. The Hedge Funds Payment is performance based. So naturally for an higher pay they perform well to make more money.
What should we do in countries like India where we do not have any Hedge Funds. Go for ETF and still use all the Technical factors for timing.
The downside with Hedge Funds is they take higher risk to gain more. so the next time you look at an MF ad or your Financial Adviser(Yes they still live) do ask them about FUND MANAGER'S FEE
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As Posted by me on
brijwanth.blogspot.com/2009/09/why-is-hedge-fund-better-than-mutual.html