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What Has Gone Wrong With Hedge Funds?

Tuesday, December 4, 2012 - 2:52 PM
Allan Roth's CBS MoneyWatch article provides some useful warnings for anyone considering hedge funds. I had thought only the very rich invested in these, but it appears they are much more common. Allan describes problems that many of his clients have experienced:
I've had many clients who thought they could get their money back at any time, until I pointed to page 173 of the prospectus and the section where the fund manager has the right to limit or deny the withdrawal request. In some cases, years later I'm still trying to help clients get their money back from hedge funds.

Ken TuminKen Tumin5,473 posts since
Nov 29, 2009
Rep Points: 125,800
1. Tuesday, December 4, 2012 - 8:46 PM
Despite common wisdom, any "balanced" fund (VBIAX comes to mind) is a "hedge fund". It is invested primarily in equities, but "hedges" that bet, so to speak, by investing in bond funds. So, mathematically, it can never do as well as either, even with low expense ratios.

A classic "hedge fund" never tried to claim it would MAKE you a gazillion dollars. What it did (and claimed) was not LOSE you a gazillion dollars. Oil sheiks could relate.
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 944