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.