December 22, 2006
Understanding Hedge Fund Like Funds
You know I’m up to my eyeballs in hedge funds. It is a full time job keeping track of all the changes that occur in this market. So when I thought I’d give you guys a taste of the world outside hedge funds, I discovered hedge fund like funds. Well, let’s reduce this confusion by saying that these are mutual funds with an identity crisis. These mutual funds try to behave like hedge funds and increase their investors’ returns.
The genesis of the pseudo-hedge fund trend dates to the 2000-02 bear market. During this time, hedge funds achieved rock star-like stardom and that was when hedge fund look-alikes began making their presence felt and they’ve been gaining in strength ever since.
A word of caution here: since many of the hedge-like funds are fairly new, their performance in down markets is unproven. And not all hedge-like mutual funds have posted market-beating returns in the bull market that began in 2003.
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