Hedge Funds For Dummies
Therefore, once certain funds have been identified as high-return performers, it is important to identify the fund's strategy and compare its returns to other funds in the same category.
To establish guidelines for a specific strategy, an investor can use an analytical software package such as Morningstar to first identify a universe of funds using similar strategies. Rikke Jorgensen rated it really liked it Feb 22, Oliver Enseling rated it it was ok Sep 11, The number of operating hedge funds has grown as well. This book walks you step by step through the process ofevaluating and choosing funds, incorporating them into yourportfolio in the right amounts, and making sure they give you thereturns you expect and deserve. John rated it it was amazing Jun 24, It's more of an introduction, so it doesn't go very in depth on topics like derivatives or futures and I had to buy separate books to explore topics like those a little more thoroughly.
To do this, an investor can establish guidelines by first generating a peer analysis of similar funds. Now an investor has two guidelines that all funds need to meet for further consideration.
However, applying these two guidelines still leaves too many funds to evaluate in a reasonable amount of time. Additional guidelines need to be established, but the additional guidelines will not necessarily apply across the remaining universe of funds. To facilitate the investor's search for high-quality funds that not only meet the initial return and risk guidelines but also meet strategy-specific guidelines, the next step is to establish a set of relative guidelines.
Relative performance metrics should always be based on specific categories or strategies.
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To establish guidelines for a specific strategy, an investor can use an analytical software package such as Morningstar to first identify a universe of funds using similar strategies. In addition, establishing the guidelines this way allows for flexibility to adjust the guidelines as the economic environment may impact the absolute returns for some strategies. These guidelines will help eliminate many of the funds in the universe and identify a workable number of funds for further analysis.
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An investor may also want to consider other guidelines that can either further reduce the number of funds to analyze or to identify funds that meet additional criteria that may be relevant to the investor. Some examples of other guidelines include:. When a domestic U. The short-term capital gains rate applies to profits on investments held for less than one year, and it is the same as the investor's tax rate on ordinary income.
This tax applies to both U. An offshore hedge fund is established outside of the United States, usually in a low-tax or tax-free country. It accepts investments from foreign investors and tax-exempt U. These investors do not incur any U. Under this structure, a fund is treated as a partnership. The founders also own the management company that runs the hedge fund.
Hedge fund managers are compensated with this carried interest; their income from the fund is taxed as a return on investments as opposed to a salary or compensation for services rendered. This represents significant tax savings for hedge fund managers. The carried interest rule has not yet been overturned despite multiple attempts in Congress. It became a topical issue during the primary election. Many prominent hedge funds use reinsurance businesses in Bermuda as another way to reduce their tax liabilities. The hedge funds then send money to the reinsurance companies in Bermuda.
Any profits from the hedge funds go to the reinsurers in Bermuda, where they owe no corporate income tax. Taxes are only owed once the investors sell their stakes in the reinsurers. The business in Bermuda must be an insurance business. Any other type of business would likely incur penalties from the U.
The IRS defines insurance as an active business. To qualify as an active business, the reinsurance company cannot have a pool of capital that is much larger than what it needs to back the insurance that it sells. It is unclear what this standard is, as it has not yet been defined by the IRS.
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He was convicted on 14 charges in and began serving an year sentence. Many Galleon Group employees were also convicted in the scandal. Before the news was made public, Gupta allegedly passed on information that Warren Buffett was making an investment in Goldman Sachs in September at the height of the financial crisis. Throughout his tenure as a fund manager, he cultivated a group of industry insiders to gain access to material information.
However, a recent act has actually loosened the way that hedge funds can market their vehicles to investors. In September , the ban on hedge fund advertising was lifted. Hedge funds are often key suppliers of capital to startups and small businesses because of their wide investment latitude. In Far from being the kind of book you can't put down, it still offered a great navigational tool for those looking to get a better understanding of the hedge fund.
In the past few years, Hedge Fund regulation has increased drastically. Feb 04, Shonnie rated it liked it. I thought this was a good broad overview of how hedge funds work.
Hedge Funds For Dummies
I was hoping for a little more emphasis on how the accounting works, but this is a good start. It's more of an introduction, so it doesn't go very in depth on topics like derivatives or futures and I had to buy separate books to explore topics like those a little more thoroughly. Jan 01, Kwame Webb rated it really liked it.
Although I have a 7 year career in investing, I found this a good review of hedge fund mechanics, portfolio assembly and basic hedge fund due diligence. Great read for anyone that is tangentially interested in the subject. Sep 22, Heather rated it liked it. Jofre rated it it was amazing Jun 20, Eugene Nomura rated it really liked it Jan 19, Brad rated it really liked it Nov 17, JD rated it liked it Oct 17, Barbara rated it really liked it Apr 22, Oliver Enseling rated it it was ok Sep 11, Juan Carlos Espino rated it it was amazing Apr 07, Bryant rated it liked it Dec 05, Conscientia rated it really liked it Dec 18, Christina Herbach rated it really liked it Nov 04, Rikke Jorgensen rated it really liked it Feb 22, Brad Thompson rated it it was amazing Oct 05, Brian Riehman rated it liked it Sep 23, John rated it it was amazing Jun 24, Claire rated it it was amazing Apr 21, Matt rated it liked it Jul 06, Paul rated it liked it Jun 04, RC rated it really liked it Apr 05, Johannes rated it really liked it Aug 06, Anastasia rated it it was amazing Jul 09, Emily Greenquist rated it it was ok Nov 24, Sze-Zin rated it liked it Feb 20, LP rated it liked it Oct 01, Chris rated it liked it Nov 16, There are no discussion topics on this book yet.