Understanding how hedge funds are structured and how the managers get paid. Created by Sal Khan.
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Finance and capital markets on Khan Academy: Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure to the market (so they could, in theory, do well in an "up" or "down" market as long as they were good at picking the good companies). Today, hedge funds represent a huge class investment funds. They are far less regulated than, say, mutual funds. In exchange for this, they aren't allowed to market or take investments from "unsophisticated" investors. Some use their flexibility to mitigate risk, other use it to amplify it.
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I think the reason why people are slightly confused as to how this all works is because the video explains each partners investment in terms of a percentage. Now, if you invest $30 Million into the hedge fund which now has $100Million in total assets, you essentially have a 30% stake, so when the total amount of assets go up by 20% over a year, the real worth of that partners money is now worth $36Million before fees.
If he wants to take away 10% of his capital from the fund, he will now have $32.4Million invested, sure his overall contribution will be less to the hedge fund than what it was before (Hence the reduction from 30% to 20%) however, after all the withdrawrals and investments finish for that period, the percentage of total investments is calculated which might mean now investor 1 and 4 own a 25% in the hedge fund each, if no deposits were made during this time period.
Unfortunately, I would have to understand what the SEC is and why it matters, and why hedge funds don't want to recognize it.
My friend was a hedge funds manager but his answers are more cynical than most people's. Anyway he said he preferred working as a Futures Trader, but I know nothing at all about that.
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So what happens if it is just paper profit? Do u get performance fees for that? Or do you actually have to sell and lock in the gains. Because how would value investing funds do it when they hold shares for years.
No, its abt 2% management fee, 20-40% typical performance fee. Performance fee is only taken if the management can exceed certain performance benchmarks that are set at the hedge fund. These benchmarks could be anything over 0% return, or it could be something like anything over 7% annual return. Typically, the benchmark is around 5-10% annual return.
So, if the fund loses money, there is no performance fee accessed.
Hi, you seem like you know something around the topic. With regards to the actual positions held by the hedge fund. At the time of the acceptance of a decrease or increase request in shares/interest/ownership etc, does the hedge fund manager automatically liquidate all of his positions/trades. If not, i.e. the liquidation is done by the manager after a decrease request is made, does he decrease each position equally (according to ratio of the position size vs total capital invested in the fund - is this regulated etc?), or can he liquidate positions as he sees fit.
Interesting. So the next person, who wants to redeem his share, the amount he gets will be based on what`s left...so if everybody want to redeem their lets say 10%, last person` 10% will be lower first person` 10% ?
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1. Periodic evaluation and prioritization of the entire innovation portfolio.
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On a strategic level, portfolio and resource management must be fully aligned.
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Dr. Ralph-Christian Ohr has been working in several innovation, division and product management functions for international, technology-based companies. His interest is aimed at organizational and personal capabilities for high innovation performance. He authors the Integrative Innovation Blog.
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The Biggest Mistakes in Financial Planning Series.
by Harvey Jacobson, CHFC, MBA, CLU.
Investors who have remained consistent with their risk profiles through volatile markets have seen a substantial recovery in their portfolios since March 2009. Those who are truly behind are those who panicked and are now left with the decision of how to recover their losses. They can, but it is a much slower recovery.
This article published originally April 13, 2010, Los Angeles Daily News.
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