|
 |
 |
Many Japanese investors have an out of date impression that hedge funds are risky.
They first think of big global speculator type images similar to George Soros, with high returns and high volatility.
This is only a small percentage of the present global reality. A "hedge fund" is a very general term that covers a wide range of styles or strategies. Hedge fund types are as varied as the stars in the sky.
The impression to new investors is that they look similar from afar
at first, but they are far from similar, when looked at later in
more detail.
One view is to consider hedge funds to be any fund with a flexible strategy that does not have a fixed style or purpose.
They are not mutual funds, money market funds or other narrow types
of investments. The reality of the hedge fund universe is however
less varied than first expected.
Only less than 10% of all hedge funds reflect the super return speculator type. The vast majority, or 90+%, target very steady, better than market returns no matter what the direction of major markets.
Originally, only private High-Net-Worth-Investors were the first wave of "Accredited" investors. They are often defined as professional experienced investors having a net worth of at least US$1 million.
Both institutions and private investors use hedge funds as a part of their portfolios. Japanese investors are only now beginning to recognize that there are two main types of tax views on hedge funds. They reflect where they are based legally and how they book and process trades.
Onshore US based hedge funds have important needs to be compliant with domestic SEC regulations. Hedge funds are limited to between 49-99 investors when based in the USA, and at least 65 of these investors must be "accredited." The Main Partner of the fund usually accepts 20% of the profits and a fixed management fee.
This is usually 2% of the assets under management.The vast majority, or 90+%, target very steady, better than market returns no matter what the direction of major markets.
Since September 2008 there has been huge market turmoil after the Lehman Brothers' bankruptcy.
Many hedge funds closed in 2009 and 2010 due to negative returns,
high water marks and redemption difficulties mainly coming from illiquid positions in CDO instruments. However,
like the recent boom in hedge funds between 2003-2006, a second wave of new hedge funds, often better experienced
traders from internal hedge funds at global investment banks, will expand especially in Asia.
With US regulations making prop trading more difficult from bank bail outs in the USA, this trend will force a rebirth of
the hedge fund industry by backing new sell side traders to buy side, often in Asia or Japan.
This majority of hedge funds often employ various hedging positions against risk. This makes them able to have positive returns regardless of general market conditions.
Offshore international hedge funds are most often investment companies that are domiciled in tax havens in the Caribbean, Asia or Europe, that fully maximize hedging techniques to reduce risk.
They often have no legal limits on numbers of investors, unless they have US based investors.
These are the often best suited to low volatility investor needs where the investment pool is shared among a large 100+ group of investors.
|
|
FinPort
Asia home