Can one person be a hedge fund?

It is possible to invest in hedge funds, but there are some restrictions on the types of investors who comprise a hedge fund’s investor pool. In general, it is extremely difficult for individual investors to gain access to a quality hedge fund.

Can I start a hedge fund by myself?

Yes, you could start with much less capital, or go through a hedge fund incubator, or use a “friends and family” approach, or target only high-net-worth individuals. But if you start with, say, $5 million, you will not have enough to pay yourself anything, hire others, or even cover administrative costs.

How can I legally invest other people’s money?

You cannot trade securities for others without becoming licensed as an investment professional. Investment professionals must be registered with the Securities and Exchange Commission or have a federal license. There are few exceptions to this rule.

How many investors can a hedge fund have?

There are two types of hedge funds: 3(c)(1) and 3(c)(7). A 3(c)(1) hedge fund can have up to 99 investors. Generally these investors will need to be “accredited investors” although some funds will choose to have up to 35 non-accredited investors.

Can I buy into a hedge fund?

Unlike a mutual fund, investors cannot easily buy into or sell positions in a hedge fund. In most cases, hedge funds are open-ended and allow investments or withdrawals on a monthly or quarterly basis. Hedge funds can invest in nearly any asset class. Typical hedge fund fees include a 2\% management fee.

What percentage of hedge funds fail?

According to a Capco study, 50\% of hedge funds shut down because of operational failures. Investment issues are the second leading reason for hedge fund closures at 38\%. When breaking down everything that can go wrong, operations makes its case for number one.

Are hedge funds illegal?

Most hedge funds are well run and do not engage in unethical or illegal behavior. However, with intense competition and large amounts of capital at stake, there are less than scrupulous hedge funds out there.