To Hedge Fund or Not to Hedge Fund
- Comments: 4
I often read financial blogs, magazines, and websites, mostly from curiosity but occasionally for investment potential. Today, I read Mark Cuban’s blog, and found his post about hedge funds to be useful and informative. It doesn’t read like a college algebra text book, but more like a magazine. In other words, it’s an easy read. Finance can be difficult to grasp at times and no one topic has been discussed as of late, quite like hedge funds.
Hedge funds are often thought of as a gold mine, or as an easy way to get rich. Not really. Hedge funds are a way that the mega rich get even richer right? That’s more like it.
Today, hedge funds are a dime a dozen. The trend at the moment is for hedge funds to go public. Seems sort of like a get rich scheme. Too good to be true. Take a couple billion dollars worth of investments of all kinds of securities. Then allow even smaller investors to get in and in the mean time, create huge returns for the large investors. Sounds great.
It used to be the case that hedge funds kept private and those in control of the hedge fund were at liberty to take the huge risks necessary to make the momentous returns promised to shareholders. This way, those of us who happen to be carrying around a spare 10 million dollars ($1 million minimum to invest), in our back pockets, could get the kind of returns we all crave.
As Mark Cuban points out in his latest blog, when hedge funds go public they lose some of the ability to take big risks. Which would mean that from his view, investing in a hedge fund that has gone public is worthless.
I am no where near an expert of hedge funds however, I did think Mr. Cuban’s post was useful. Let me know if any of you have had any experience with hedge funds, I am truly interested in hearing about them. Here are a couple of links to good sites about hedge funds that I found useful.
I don’t know too much about hedge funds except that the leverage is incredible. These guys are leveraging 100 to 1 sometimes which is why the risk is so huge. And since it all comes from a lot of creative wheeling and dealing, Mark’s probably right … a public hedge fund just isn’t going to have the kind of unbridled madness that made them what they were in the beginning.
I don’t know anything about hedge funds, but it sure is freaky to see Cuban’s face on Dirk’s body!
lol!
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