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Types of Hedge Fund Investors
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Types of Hedge Fund Investors Types of Hedge Fund Investors Types of Hedge Fund Investors Types of Hedge Fund Investors



Types of Hedge Fund Investors
Types of Hedge Fund Investors

Types of Hedge Fund Investors

Family office investment offices may act as the gatekeeper for the in-
vestment assets that might be invested in hedge funds. The investors who
make up a family office are generally high-net-worth individuals and, by
virtue of the expert advice provided by the office employees, are sophisti-
cated investors.
It would be wrong to assume that all the investors in the office are
ideal candidates to make hedge fund investments. The office may assist in-
vestors of two or even three generations. Various factions have more or less
wealth, differing risk tolerance, and different tax sensitivities. However, it
is the responsibility of the family office employees to deal with these differ-
ences. To the hedge fund, the family office represents a particularly sophis-
ticated high-net-worth individual. However, getting an investment from
the family office may mean getting separate, sizable investments from sev-
eral family members.
Although family offices may invest in any kind of hedge fund, the ad-
visers often place less priority on very high returns and more priority in
balancing the expected returns against the risks assumed by investing. Sim-
ilarly, the advisers generally favor strategies with low correlation to tradi-
tional investments. Family office advisers may invest indirectly in hedge
funds by investing in a fund of funds to take advantage of the specialized
hedge fund knowledge that may exist in those funds. Alternatively, the
family office may invest in two or more funds to diversify the hedge fund
returns. Finally, the advisers may blend the hedge fund into portfolios that
aren't well-diversified as when family members own large positions in
closely held firms. They are more concerned with the risk and return of the
portfolio including the hedge fund and less concerned with the perfor-
mance of the hedge fund as a stand-alone investment.
FOUNDATIONS AND HEDGE FUNDS
Foundations are generally managed to escape income tax on investment re-
turns. Because they aren't penalized by high tax rates on ordinary income
and short-term capital gains, they have been early investors in hedge funds.
What is a Foundation?
A foundation is a pool of money and a group of employees to invest that
money and to distribute part of the pool to activities and organizations
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HEDGE FUND COURSE
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