WEST PALM BEACH, FL (HEDGECO.NET) – Demarcation lines between mutual funds and hedge funds have slowly but steadily diminished as more mutual fund organizations roll out new products utilizing hedgefund strategies.
As hedge funds continue on their growth path, increasing numbers of traditional investment managers such as mutual funds are studying for ways to get a piece of the action by establishing their own hedge funds as well. But many argue that when mutual fund managers run hedge funds, such condition invariably can create conflicts of interest.
Hedge funds have over the years experienced record busting growth, as wealthy persons and institutions poured in assets into alternative investment instruments. Hedge funds are for the most part loosely regulated investment products, accepting minimum investments of usually about $1million. Unlike mutual funds, hedge funds usually bet on stock declines, as part of their investment strategy.
The mutual fund industry has gradually been introducing new products, which use sophisticated hedge fund strategies; such new products are aimed at the growing number of mutual fund investors seeking hedge fund investment strategies.
Jonathan Ferrell, portfolio manager for the Rock Canyon Top Flight fund, said, �Investors have matured, more mutual fund investors understand hedge funds and the techniques they use now,� according to him.
For instance, Lee Schultheis explained, �that retail demand for products that do not have a strong risk exposure to the direction of interest rates or equity markets is creating opportunities for both sides.� Schultheis is the manager of the Alpha Hedged Strategies Fund, managing a portfolio of about US $17million. His fund allocates investment assets to specialized hedge fund managers, using long/short equity strategies, as well as merger and fixed income arbitrage.
Additionally, the high minimum investment requirements for investing in hedge fund strategies have been trending lower; few years back, minimum hedge fund investments were typically about $500,000 to $1 million. Today some hedge funds of funds accept about $25,000 to $50,000 as minimum investments. While mutual fund assets dwarf those of hedge funds; about $7 trillion and $1 trillion respectively, hedge funds have continued on an accelerated growth path, from about $500 billion about five years ago, to over $1 trillion today.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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