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How can I invest in hedge funds?
Fund managers are allowed to accept up to 35 non-accredited investors, but for the most part you will either need to satisfy the “accredited investor” requirement of the SEC to invest directly in a hedge fund.
Otherwise, there are now hedge fund indexes and ETFs that track and mimic hedge fund strategies that are accessible to everyone. You should know now that the minimum initial investment requirement to participate in a hedge fund can be quite large, such as upwards of $1 million.
Some hedge funds seeking the 3(c)(7) filing exemption under the Investment Advisors Act of 1940 will require investors to fit the Qualified Purchaser criteria, which requires an investment portfolio of over $5 million.
For investors without the large capital requirements, there are ETFs and mutual funds that mimic hedge funds. As for actual hedge funds, there are multiple hedge fund databases, but selecting the right hedge fund may prove to be a daunting task.
A lot of hedge funds are not very transparent and are extremely secretive about their strategies. Frankly, the best way to invest in a hedge fund is to get a referral to a particular asset manager.
Many large brokerage houses have in-house hedge funds and would be happy to sell them to you, if you meet the minimum requirement for the investment. Don’t be surprised to find out that the minimum investment in a particular Hedge Fund is $10 million.
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