Why are hedge funds NOT suitable for retail (unsophisticated) investors? You response must draw upon...
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Why are hedge funds NOT suitable for retail (unsophisticated) investors? You response must draw upon the two most important considerations. Your response may be framed around an average retail investor, in his mid-40s, who desires to create a nest-egg for his post-retirement needs, is unable to (or restricted to) invest in a hedge fund. 1. Explain the risks faced by the investor when investing in a managed investment scheme, such as liquidity (ability to move in and out of the investments) and transparency (ability to identify and value investments) Explain the constraints faced by the investor, such as capital (minimum capital necessary to invest) and sophistication (ability to understand or devise complex investment strategies) Show how mutual fund overcomes these risks and constraints, while Hedge funds do not. 2. 3
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