Tuesday, December 16, 2008

Funds Performance

Many investors prefer to choose a mutual fund because of its past performance record. The sponsor of the mutual fund tries to highlight the best times and results during the past years, which are precisely selected. They also glorify those investment manages who had the best results for some particular period. They focus on their victories and avoid talking about their slow times and losses. That is why this information is not very helpful, it is flawed. Investors should first pay attention to the principal characteristics of the fund and only then evaluate its past performance records.
You have to ask many question, to protect your money put into the investment market. According to many laws and regulations, all investors are to have access to some key info about an investment before they put the money in it. And that is why companies should disclose these facts and offer some basic knowledge to investors.
To make your investment fruitful, you have to be careful and educated. First of all, you have to learn the financial information about the company you are going to deal with. The most important facts that you have to check are different periodic reports, registration statement, and prospectus. This is all that the company has to disclose according to the Investment Company Act. You have to search for your own methods that will work the best on you and your investments.
Adequate information should be available to any prospective investor. And this information that is disclosed in a form of a document is called prospectus. A prospectus is a document that should contain the following information: the name of the fund, information about the investments of the fund, annual and semi-annual reports to shareholders should be available upon request. The prospectus should also include investment objectives and goals and risk and return summary.
Investment companies specify their investment policy in their prospectuses. An investment manager has a broad latitude in where to invest the assets of the fund. Investment adviser is a very important person who takes almost all control over your money. That is why it is also essential to learn more about your money manager.
And then, on the basis of all this information, you can make a decision of whether to purchase the shares or not. And it should be a balanced and objective decision.

Wednesday, December 3, 2008

Mutual Fund Reputation

After this the reputation of mutual funds was contaminated.
In 2004, Invesco Funds Group was accused of being involved in securities fraud and improper trading. The founder of the company, Richard S. Strong was trading in and out for his own profit. Invesco Funds Group joined a group of investment companies sued by NY Attorney General for improper trading. The most outstanding detail of tha scandal is that Mr. Strong was said to be worth $800 million and three fourths of that were earned from the improper trading.
In 2004, well known Marsh and McLennan company was accused of price fixing, bid rigging, the use of hidden incentive fees and collusion. It settled the case paying $850 million to policyholders hurt by. Marsh and McLennan issued a public apology and even called its conduct illegal and shameful. This company is one of the largest insurers in the United States and the image of this company was tarnished in the scandal.
In 2006, there was a law suit filed against BMA Ventures, Inc. This company is a registrered investment adviser and it was accused of issuing newsletters advising that the recipients put their money in the stock of some companies. All of those stocks were penny stocks. These newsletters were fraudulent and the company was secretly selling its stock in the same companies contrary to its recommendations. This fraudulent tactics is known as a scalping scheme. This fraud resulted into astronomical profits for BMA Ventures. The company violated the anti-fraud provisions of the a number of laws and the Investment Advisers Act of 1940. The U.S. Securities and Exchange Commission applied permanent injunctions against BMA Ventures and civil monetary penalties.

Mutual Funds Scandals

Mutual Funds Scandals. Almost half of all American families own shares in mutual funds. People very often put their money in mutual funds in IRAs or company pensions. However, during the past five years there have been so many mutual funds scandals spread, that a lot of investors started to think about withdrawal of their money. A lot of the leading investment companies have been involved in the wildfire. Nevertheless, the very largest investment companies such as the Vanguard Group and American Funds, had no relation to those scandals. Most of the scandals were focused on two problems: late trading and market timing. And the fraudulent companies were making money, while the investors were losing it. Almost twenty companies have been involved in those scandals and in fraudulent business tactics. The most notorious of those cases was the late trading scandal in which Canary Capital Partners LLC was involved. The company was accused of late trading that violates a number of laws and regulations. Canary Capital Partners LLC in collusion with many well-known mutual funds bilked investors: the company sold mutual fund shares when the market was officially closed at the price of the past day and could use all the necessary information they learned during the day. In such a way Canary Capital Partners and its partners could make huge profits that resulted in huge losses for shareholders. As a result of this situation, a number of nation known mutual fund companies had to pay fines and penalties to return to investors there money. And Canary Capital settled the case paying $40 million.

Wednesday, November 5, 2008

Popular investments

The formula of the popularity of mutual funds looks like this: time plus rate of return.
Investment manager directs the investments of the fund according to the objective of the funds. This objective could be: long-term progress, high ongoing income, and stability of course.
There are a lot of benefits of mutual funds. The most popular feature of mutual funds is their variousness. Mutual funds can invest in anything. They can hold securities from a variety of issuers. That enables investors to put their money into the securities of hundreds of issuers and reduce the risk of losing the money. Besides, mutual funds are professionally managed and they offer high liquidity, which means an easy access to the money.
Moreover, it is very convenient to invest in mutual funds. You can easily purchase shares online and sell them by telephone. And it is very easy to keep records of what happens to your investment.

Thursday, October 23, 2008

Mutual Funds

Investing is a very complex and interesting process. Bonds or securities, real estate, film industry or gold – you can lose or gain, the rest is history. It can be worhwhile and successful, but there are no guarantees that you will get your money back doubled and that securities will not lose their value. However, people have a lot of different means of how to control this process. Presently, mutual fund industry of the United States is the largest one in the world. There are various kinds of investments and all of them have different levels of risk and rates of interests. People usually differentiate between low-risk investments, mid-risk investments and high-risk investments. Mutual funds are for a long time considered to be low-risk investments. The popularity of mutual funds is increasing because they are replacing traditional savings instruments that include bank and trust deposits. Presently, mutual funds are even more popular than direct investment in stocks and bonds.

Wednesday, August 6, 2008

Hedge Fund Profitability

Hedge funds are typically open-ended, in that the fund will periodically issue additional partnership interests or shares directly to new investors, the price of each being the net asset value (“NAV”) per interest/share. To profit from the investment, the investor will redeem the interests or shares at the NAV per interest/share prevailing at that time. Therefore, if the value of the underlying investments has increased (and the NAV per interest/share has therefore also increased) then the investor will receive a larger sum on redemption than he paid on investment. Investors do not typically trade shares among themselves and hedge funds do not typically distribute profits to investors before redemption.

Sunday, August 3, 2008

Hedge Fund Administrtaion

A lot has been made of hedge fund managers but while they are often the public face of a hedge fund, they are hardly the only people involved in its success or failure. Hedge fund administrators play a vital role in maintaining a fund. Administrators don’t manage portfolios, trade or research, develop products, raise capital, or manage client relationships. Instead, they services clients and investors, support a fund from an operational end, and provide financial, tax and compliance reporting. This includes audits and tax coordination; compliance services such as anti-money laundering and background checks on clients as required by the Patriot Act. These functions are critical to the successful daily operation a fund and investment adviser.

Wednesday, July 30, 2008

Hedge Fund Fees

In instances of poor performance, funds may choose to close down rather than work without fees, as would be required by their high water mark policies. Due to this, Hedge funds can have very short lifespans, especially if the manager makes a critical error. There is very little to prevent an Investor from losing all the money he invested in a hedge fund. In fact, hedge funds penalize investors who try to withdraw their money. They do this be charging investors a fee if they withdraw money from the fund before a certain period of time has elapsed since the money was invested. The purpose of the "surrender charge" is to moderate the outflow of assets, which can allow the fund manager to reduce the turnover of investments, fund managers claim this helps them invest in more complex, longer-term strategies. The fee also dissuades investors from withdrawing funds after periods of poor performance. The fee is typically known as a "withdrawal fee" or a "redemption fee" Having a hedge fund administrator for your fund is extremely important in today’s constantly changing hedge fund environment.

Thursday, July 10, 2008

Performance Fees

Typically, hedge funds charge 20% of gross returns as a performance fee, but again the range is wide, with highly regarded managers demanding higher fees. In particular, some hedge funds have performance fees as high as 44%! Managers argue that performance fees help to align the interests of manager and investor better than flat fees that are payable even when performance is poor. However, performance fees have been criticized by many people, for giving managers an incentive to take excessive risk rather than targeting high long-term returns. In an attempt to control this problem, fees are usually limited by a “high water mark” and sometimes by a “hurdle rate”.

Saturday, July 5, 2008

Hedge Fund Fees

To insure that a hedge fund stays as profitable as possible, the fund manager is paid via both a performance and management fee. These fees are closely associated with hedge funds, and are intended to incentivize the investment manager to produce the largest returns they can. This is because a typical hedge fund fee is “2 and 20", which refers to management fees of 2% and performance fees of 20%. These ratios are very different from those found on a public mutual fund.

Monday, June 30, 2008

Hedge Fund US Regulation

In December 2004, the SEC issued a rule change that required most hedge fund advisers to register with the SEC by February 1, 2006, as investment advisers under the Investment Advisers Act. The requirement, with minor exceptions, applied to firms managing in excess of US$25,000,000 with over 15 investors. The SEC stated that it was adopting a "risk-based approach" to monitoring hedge funds in part because of the massive amount of money collectively invested by hedge funds (over 1 trillion dollars!) The rule change was challenged in court by a hedge fund manager. In June 2006, the U.S. Court of Appeals for the District of Columbia ruled in Goldman v SEC, that the SEC’s regulation was not unfair and arbitrary. It was sent back to the agency to be reviewed.

Friday, June 20, 2008

Hedge Fund Technology

The first directory of hedge fund information was published in 1990 by Antoine Bernheim. Other paper directories followed, and while it was an improvement over the existing methods for gathering hedge fund data, they still proved unwieldy, lacking any kind of apparatus for methodical hedge fund searches. Initial attempts to analyze hedge fund data often involved numerous spreadsheets and complex calculations. Since the rise of the PC, more comprehensive platforms which are capable of utilizing input from multiple commercial databases have been developed. Single-database analysis via the internet is also now available.
The electronic data market has grown exponentially since 1997. There are currently 12 major hedge fund databases available (listed below) some with downloadable analytic packages. Although generally assumed to overlap substantially, there are still unique funds listed on each individual database. It’s normal for approximately 26% of hedge fund investors subscribe to two or more databases. By simply purchasing one or more of these databases investors obtain instant access to thousands of funds, full statistical and qualitative searches, sophisticated portfolio construction and asset allocation, peer and style analysis, simulations and more.

Hedge Fund US Regulation

The typical public investment company in the United States is required to be registered with the U.S. Securities and Exchange Commission. Mutual funds are the most common type of registered investment companies. Aside from registration and reporting requirements, investment companies are subject to strict limitations on short-selling and the use of leverage. There are other limitations and restrictions placed on public investment company managers, including the prohibition on charging incentive or performance fees. This is of course, the polar opposite from hedge funds.

Sunday, June 15, 2008

Legal Structure

From a legal perspective, the structure of a hedge fund is very simple. It’s basically a means for holding and investing the funds of its investors. The fund itself is not a genuine business. This means that it has no employees and no assets other than its investment portfolio and a small amount of cash, and its investors are simply considered clients. This is very different from a public mutual fund that has a very defined structure. In a hedge fund, the portfolio is managed by the investment manager, which has employees and property and is the actual business. There is nothing to prevent an investment manager from having numerous hedge funds under his control. This of course, has led to people questioning whether a conflict of interest exists when a hedge fund manager invests his own money into one of the funds they are managing.

How Does a Hedge Fund Work

The hedge fund gets its name because they seek to offset potential losses in the principal markets they invest in by “hedging” their investments using a variety of methods. A hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment. A typical example of a hedge is short selling. Short selling is the practice of selling securities the seller does not then own, in the hope of repurchasing them later at a lower price. This is done in an attempt to profit from an expected decline in price of a security, such as a stock or a bond. Another similar strategy consists of buying options known as puts. A put option consists of the right to sell an asset at a given price; thus the owner of the option benefits when the market price of the asset falls. Recently, the term "hedge fund" has started to be used when describe any fund that uses “hedging” methods. However, some funds only employ these methods to increase leverage and risk, and therefore return, rather than reduce it.

Tuesday, June 10, 2008

Hedge Fund History

While a few investors such as Warren Buffett adopted the structure that Jones created, he and his structure was not widely known until 1966. In that year, people noticed that Jone’s fund outperformed the best mutual fund over the previous five years by 44 percent, despite its management-incentive fee. On a 10-year basis, Mr. Jones's fund had beaten the next top performer, the Dreyfus Fund by 87 percent. The same year, the term 'hedge fund' was coined to describe Jones’s approach.
In total, Alfred Jones's investors lost money in only 3 of his 34 years.

Hedge funds fully came into prominence in the late 1980’s. The 1990’s saw hedge funds become major drivers of the stock market. This was also the time for one of hedge funds greatest successes and failures, Long Term Capital Management. LTCM (as it was commonly referred to) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became a prominent example of the risk potential in the hedge fund industry.

Friday, June 6, 2008

Hedge Fund History

Hedge funds were created by Alfred Winslow Jones in 1949. Jones brought together two economic concepts to create what he considered a conservative investment scheme. He used leverage to buy more shares, and used short selling to avoid market risk. This approach has become a hallmark strategy of many hedge funds known today. He bought as many stocks as he sold, so regardless of whether the market was up or down, Alfred tried to maneuver himself into a good position. To Alfred this meant the crucial question, then, would not be the direction of the market but whether the manager had picked the right stocks to buy and sell. The fund avoided requirements of the Investment Company Act of 1940 by limiting itself to 99 investors in a limited partnership.

Wednesday, June 4, 2008

Investor information

A qualified client is defined as a company which has at least $ 750,000 under the management of the investment adviser. It can also refer to an individual or a couple who have a net worth of 1.5 million or more. It’s clear that not everyone can invest in a hedge fund but because such large sums of money are at the disposal of a fund manager, they are able to engage in more complex and riskier investments than a public fund might attempt.

Sunday, June 1, 2008

Hedge Funds: A Broad Overview

The term “Hedge funds” is a buzzword which seems to be on everyone’s lips these days especially since the US economy is slowing down. This is understandable considering the hedge fund has become a dominant force in the stock market, managing over 700 billion dollars. So what is a hedge fund and how did it become so prevalent in the market? Is it worth to invest in one yourself? Read on and find out.