Investing In Hedge Funds - Who Can Do It?

Investing in hedge funds is not for everyone. To be eligible to invest in a hedge fund, you must be either an accredited investor or a qualified purchaser. To be an accredited investor you must have a net worth of more than one million, and to be a qualified purchaser you must have five million in investments not including property used for business or primary residence. To be allowed to invest in a hedge fund, the fund must reasonably believe you meet these requirements. My site Corporate/transactional legal needs

Typically, they require potential investors to fill out a questionnaire that asks questions designed to determine whether or not the requirements are met. In the end, however, eligibility is on the honor system, as not much back up is required for the answers given on the questionnaire. For example, you might have to provide a financial reference, but it is not likely that anyone will ask to see tax returns.

Those new to hedge funds should visit with counsel to determine which funds are legitimate and stable. It can also help to review financials, and note well known CPA and law firms affiliated with the fund. There have been funds crash and burn in the past that had big name affiliation, but it is much more comforting to see names that are in the public eye rather than unknowns. Also, ensure that the fund undergoes a regular audit before investing.

Fund managers are allowed to accept thirty-five non accredited investors. However, the only way a non- accredited investor might be accepted into the fund is if they know the manager. This is because it is highly unlikely that a non-accredited investor would hear about the fund anyway. The SEC restricts hedge fund advertising, including public websites.

Some worry that the one million net worth for accredited investors and the five million in investments for qualified purchasers is not strict enough. This could be, as these numbers were set in 1982 and have not been changed since. The accredited investor qualification is not as difficult to meet as it might at first sound. This is a combined net worth between spouses, that can include the estimated value of your home. There is also a requirement for an income of $200,000 for an individual, or a joint income of $300,000 if married. In the end, hedge funds are not for everyone, but if you meet the qualifications, and research possible opportunities well, they can be profitable investments.