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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

Foundations as Hedge Fund Investors
A foundation usually seeks to pursue long-term objectives. Perhaps as a
consequence, foundations take a fairly long-term perspective on invest-
ment decisions. Foundations are not greatly bothered by lockup provi-
sions, especially if the funds can justify a reason for a lockup period, based
on the underlying assets held by the funds.
Because of the threat of unrelated business income tax (UBIT), foun-
dations tend to avoid investing in highly leveraged hedge funds. As a re-
sult, foundations are less likely to invest in convertible bond strategies
and fixed income arbitrage strategies, which can have leverage of 6:1 up
to 40:1, unless the hedge fund is located offshore and organized as a
corporation so that the foundation is not allocated significant interest
expenses.
Foundations often invest in hedge funds by hiring consultants to aid in
determining a portfolio strategy, suggest individual funds within a strategy,
and perform due diligence analysis of alternatives. Foundations may also
invest in funds of hedge funds and rely on the fund of funds manager for
asset allocation, due diligence, and so on.
ENDOWMENTS AND HEDGE FUNDS
Endowments also consist of pools of funds used to support certain projects
or satisfy objectives. However, an endowment is usually affiliated with a
particular philanthropic organization and the endowment is created to
fund a portion of the expenses in that organization.
Why Endowments Invest in Hedge Funds
Many endowments have been long-term investors in alternative assets,
including real estate, venture capital, and hedge funds. Endowments
may be motivated by higher returns, lower risk, or low correlations,
much like other investors. The endowments of Harvard University and
Yale University along with other prominent university endowments have
earned spectacular returns from these alternative assets. Other endow-
ments may feel a degree of peer pressure to include some alternative as-
sets in their portfolios.
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HEDGE FUND COURSE
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