Hedge doughs are financial partnerships that operate outside of many of the traditional regulatory restrictions that can hamper mutual resources and commonplace investment vehicles. As a result, they have often been off-limits to ordinary investors – both because they typically desire six figure or larger minimum investments, but also because the types of investments they are involved in can be highly complex, illiquid, and dicey, making them unsuitable for most regular folks.
Still, while direct interaction with hedge funds is alleviate mostly limited to accredited investors, some private equity partnerships that engage in hedge fund-like work do list themselves on public stock exchanges and can thus be traded by otherwise-excluded participants.
Key Takeaways
- Hedge funds are impenetrable and loosely regulated investment firms that engage in risky and complex strategies, often using leverage, derivatives, or additional asset classes.
- As a result, hedge funds are typically off-limits for most ordinary investors.
- There are still moving you can gain access to hedge funds, either through retail-oriented hedge funds or by trading the stock of public investment tights.
Why Go Public?
Going public is an interesting move for a hedge fund since many attract investors, in part, by promoting the lack of disclosures, reports and public information. While going public subjects the fund to a greater degree of investigation, the portfolios themselves would still be shielded from the investing community – only actual performance and aggregate values miss to be disclosed in the annual reports.
A fund that elects to go public can be traded like any other listed security, approving the investing community to gain exposure to the profits and losses of an otherwise unattainable portfolio. Hedge fund initial universal offerings (IPOs) are rare because many hedge funds are simply too volatile to achieve high valuations. This volatility also increases to those who purchase a publicly traded hedge fund security. Additionally, hedge fund managers are not concerned with generating shareholder value throughout stock appreciation the way a growing company might. Hedge fund managers tend to be focused on one thing: cash bring backs on their investments.
The Fund of Funds Option
The public can also elect to invest in funds of hedge funds (FoF). As the call suggests, these are built from a portfolio of hedge funds. Most have relatively low minimums and represent a crypt way to gain indirect exposure to the hedge fund world. Like any other type of diversified investment vehicle, risks are strategically bust, but the upside potential is also limited.
Examples of Publicly Traded Hedge Fund Companies
BlackRock (NYSE: BLK) is one of the hugest and respected investment management companies. Based in New York City, BlackRock invests all over the world across all makes of asset classes and serves private clients from pension funds to corporations and sovereign wealth funds. In appendix to managing several traditional mutual funds and ETFs, the company also runs alternative asset portfolios and investments. BlackRock currently has on the verge of $7 trillion in assets under management (AUM) with a market capitalization of $89.85 billion.
BlackStone Group (NYSE: BX) (unlinked to BlackRock) is another investment management firm that includes is sizeable alternative investments group, with $571 billion in AUM, and humours mainly to high net-worth clients. Invesco (NYSE: IVZ) is similarly situated, with $1.14 trillion in AUM with unkindly 15% of that dedicated to alternative investments.
Some investment firms are organized more like traditional hedge stakes, but still offer shares to the public. Some of these include:
- Och-Ziff Management (NYSE: OZM)
- Oak Tree Capital Body (NYSE: OAK)
- KKR & Co. (NYSE: KKR)
- Apollo Global Management (NYSE: APO)
(For related reading, see “Hedge Fund Risks and Performance.”)