A Financial Copywriter’s Guide to Hedge Funds

by Leon Altman⁽¹⁾
InvestingIN Enterprises

While hedge funds sound like glamorous, money-making machines, a financial copywriter needs to make clear to investors that these aggressively managed types of portfolio investments come with a good deal of risk. But because of that high level of risk, they are also likely to produce higher returns, should they succeed. If you are new to investing, it is unlikely you will want to jump into this particular type of investment straight out of the gate. A number of years ago, hedge funds were content to stay under the radar and market their services by word-of-mouth. But as the number of hedge funds has proliferated many find the need to use a financial copywriter to market themselves to prospective investors.

Hedge funds use some of today's most advanced investment strategies to achieve their goals. Some of these strategies include long, short and derivative positions and leveraged positions. This occurs in both the domestic markets and in the international markets. The entire point of using hedge funds is to generate a higher level of return from them. Either this may be done in an absolute sense or it may be done over a specified market benchmark.

Hedge funds are also limited member clubs. In other words, they are often private investment partnerships and are not open to just anyone who wishes to invest in them. They are often available to only a limited number of investors. Those who do invest in hedge funds will need to have a very large amount of initial minimum investment to get their foot in the door.

What a financial copywriter needs to make clear about hedge funds

It is important that a financial copywriter point out that hedge funds are not liquid. Their illiquidity is often considered a drawback for some investors. Those who deposit funds into this type of fund are likely to have to keep the funds in that investment for at least a year, with some requiring a longer time requirement. This was a severe drawback during the depths of the financial crisis in 2008-9 when hedge fund investors couldn't withdraw their funds as the market tumbled.

It is also important for the financial copywriter to note that in most cases, hedge funds are unregulated. This is the opposite of mutual funds. Hedge funds are not regulated because it is assumed that only sophisticated investors invest in them. In the United States , laws regarding hedge funds require that those who invest in the funds, or at least most of those that do, must be accredited.

The accreditation often holds that the investor must make a minimum amount of money each year and they must have a high net worth, usually at least $1 million in net worth. However this minimum has effectively been lowered considerably in recent years. They must also have specific investment knowledge to participate in hedge fund investing.

If you break down hedge funds into simplistic terms, however, they are quite like mutual funds in that a group of investors come together to put funds into investments, according to the directives of that funds. The size and risk factors associated with hedge funds are far more risky than those associated with mutual funds, though.

As hedge funds try to stand out from the growing competition, as well as some of the bad press in recent years, a financial copywriter will find a great deal of business in this once secretive corner of the investment world.

Leon Altman is a financial copywriter and marketing consultant with over two decades of experience. To find out more about his copywriting and marketing services, go to www.altmancopypro.com

Article submitted Tuesday, November 10, 2009 & read 126 times.

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