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Are Hedge Funds Chasing Performance?

Hedge fund managers have the potential to earn much larger fees than other investment managers do. The  two and twenty  compensation structure allows the best-performing managers to earn hundreds of millions to billions of dollars in fees when they make big profits for their clients. However, when hedge fund returns barely surpass or even lag benchmarks, such as the Standard and Poor's (S&P) 500 Index, critics attack the two and twenty structure by saying that it unfairly rewards managers. From 2011 to 2015, average annual hedge fund returns of 1.7% lagged far behind average annual returns of 11% for the S&P 500 Index. The  Barclays  Hedge Fund Index, which measures the average return of all hedge funds, generated year-to-date (YTD) returns of 0.76% through the end of May 2016, compared to 2.59% for the S&P 500 Index. The rally in equities that began in early February 2016 exacerbated the disparity between hedge fund and market performance. Some observers won

How To Start a Hedge Fund In the United States

The United States offers one of the best business environments in the world to start a hedge fund. In the first half of 2014 alone, 39 new hedge fund firms with at least $50 million dollars in assets under management were incorporated and managing in total more than $15.3 billion dollars. Given the growth and popularity of the hedge fund industry, here are the general steps for establishing a U.S.-based hedge fund. ( Related   7 Hedge Fund Manager Startup Tips )  What is a Hedge Fund? The term  hedge fund  refers to any type of private investment company that is operating under certain exemptions from registration requirements under the Securities Act of 1933 and the Investment Company Act of 1940. (Ironically,  hedge funds  may use investment strategies that have nothing to do with hedging.) Given these exemptions, it is much easier to start a hedge fund firm rather than a firm that manages more highly regulated investment options such as mutual funds. The relaxed restric