Hedge funds are financial partnerships that operate outside of many of the traditional regulatory restrictions that can hamper mutual funds and commonplace investment vehicles. While direct interaction with hedge funds is limited to accredited investors, some private equity partnerships list themselves on public stock exchanges and can be traded by otherwise excluded participants.

Going public is an interesting move for a hedge fund, since many attract investors, in part, by touting the lack of disclosures, reports and otherwise public information. Going public subjects the fund to a greater degree of scrutiny. The portfolios themselves would could still be shielded from the investing community; only actual performance and aggregate values need be disclosed in the annual reports.

A fund that elects to go public can be traded like any other listed security, allowing the investing community to gain exposure to the profits and losses of an otherwise unattainable portfolio. Hedge fund initial public offerings (IPOs) can be rare; some funds simply have too volatility to achieve high valuations. This volatility also extends to those who purchase a publicly traded hedge fund security. Additionally, hedge fund managers are not concerned with generating shareholder value through stock appreciation the way a growing company might. Hedge fund managers tend to be focused on one thing: cash returns on their investments.
The public can also elect to invest in funds of hedge funds. As the name suggests, these are built from a portfolio of hedge funds. Most have relatively low minimums and represent a safe, accessible way to gain indirect exposure to the hedge fund world. Like any other type of diversified investment vehicle, risks are strategically reduced but also limit upside potential.

  1. Licenses for hedge fund manager

    Obtain the pertinent information about the various types of licenses a hedge fund manager needs to have to legally operate ... Read Answer >>
Related Articles
  1. Investing

    What are hedge funds?

    A hedge fund is basically an investment partnership. It's the marriage of a fund manager and the investors, who pool their money together into the fund.
  2. Managing Wealth

    HF Performance Report: Did Hedge Funds Earn Their Fee in 2015?

    Find out whether hedge funds, which have come under tremendous pressure to improve their performance, managed to earn their fee in 2015.
  3. Investing

    6 Reasons Hedge Funds Underperform

    Understand the hedge fund industry and why it has grown exponentially since 1995. Learn about the top six reasons why the industry underperforms.
  4. Investing

    Hedge Funds Tutorial

    Hedge funds can be an integral part of a well-diversified portfolio - if you know how to choose them.
  5. Investing

    Activist Hedge Funds: Follow the Trail to Profit

    Learn to profit by following the lead of hedge funds.
  6. Managing Wealth

    Will Hedge Funds Be Around in 10 Years?

    Learn why some analysts see hedge funds as a dying breed, especially after a torturous January 2016 for fund managers around the world.
  7. Investing

    Are Hedged Mutual Funds For You?

    Long the purview of institutional investors and ultra-wealthy individuals, financial services firms are making alternative investment strategies available to a wider audience of investors. Understanding ...
  8. Investing

    189 New Hedge Fund Launches in Q1 2017: Why, God, Why?

    189 new hedge funds launched in the first quarter of 2017, but does that represent a welcome change for the industry or misplaced optimism?
  1. Absolute Return Index

    The absolute return index is used to compare the absolute returns ...
  2. Buying Hedge

    A buying hedge is a transaction used by commodities investors ...
  3. Long Hedge

    A long hedge is a situation where an investor has to take a long ...
  4. Perfect Hedge

    A perfect hedge is a position that would eliminate the risk of ...
  5. Two and Twenty

    Two and twenty is a compensation structure that hedge fund managers ...
  6. Double Hedging

    Double Hedging refers to a trading strategy in which an investor ...
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center