As a beginner when you set out to find a good private hedge fund, there are a lot ofquestions that can arise in your mind during the process. The most importantquestion among the many doubts is ‘what makes a hedge fund good’? And to help you answer that, here are 4 qualities of a good hedge fund –
1) Masters of a particular investment domain –
It is not possible to be good at everything and thus the same logic applies to hedge funds. Instead of finding the one that can do everything, find the hedge fund that is the unchallenged king of a certain investment domain. To clarify further, if you have an appetite for risk in the hopes of gaining exponential returns, find a private hedge fund that is the best at leveraged trading. However, if you like to keep the risks at a minimum at the cost of the profit potential, look for funds that are hedge masters; hedging is the practice of opening both buy and sell positions in such a way that the market exposure for the investment remains neutral.
2) They have a proven track record –
Hedge funds are not unicorn startups and the best fund managers know this. As a result, good hedge funds will never ask you to invest with them solely on their word; they will provide you with enough pieces of evidence to back their claims. A good product does not have to market itself; its quality is what attracts the customers and the same is applicable to hedge funds as well. As an investor, you need to keep in mind that the hedge funds that get in your face with their service offers are probably the ones you need to approach with caution.
3) Led by an accomplished individual –
Managing a hedge fund is not an easy task and rightly so as there are millions to billions of dollars to deal with. Owing to this, the best hedge funds are run by exceptionally skilled investors who have sound technical knowledge. One can only become a private hedge fund manager after showcasing an investment track record that has consistently delivered results that beat the market. Along with the required financial knowledge, hedge fund managers are also required to have refined people-handling skills. The quality of the hedge fund is defined by the skills of its manager and for successfully choosing the right hedge fund, it is recommended to gauge the personality traits and investing achievements of the manager leading the corporation.
4) The commissions are proportional –
A good hedge fund will not charge you the lowest of the commission charges in the market. They would rather cost you proportionally to the service they provide, maintaining a healthy balance between the value provided to the money asked in return for the same. As an investor, have a look at the commissions that a hedge fund charges and choose the one that best suits your budget while providing the most value for your invested capital.
We hope this article helps you identify a good private hedge fund that becomes a quintessential part of your investment portfolio. All the best!
