investment company outline

Hedge funds

·        Investment pool

·        Not advertised to the public

·        Professional money managers

·        Wealthy individuals invest

·        Institutions with much cash invest

Hedge fund advantages

·        Trades on any market worldwide

·        Unlimited short selling

·        Unlimited use of derivatives

·        Unlimited use of leverage

·        NO Investment Company Act of 1940, Do NOT have to be registered with the SEC

Hedge fund requirements

• must not need access to money immediately/ASAP
• sophisticated investor
• earned income of $200,000 in last two years
• expected income of $200,000 in next year
• minimum $1,000,000 net worth
• trust with assets of $5,000,000

Hedge fund fees

• 1-4% asset based fee
• performance based fee of 20%
• redemption fee if early withdraw
• buy and redeem at net asset value

Webstar Griffin Tarpley, Princeton educated writer warns

1. lack transparency
2. few disclosure documents
3. hard to assess diversification strategies
4. lack regulation
5. not regulated by any entity
6. large amounts of borrowed money/high leverage

Business Development company

• 1940 Investment company act says BDC-regulated investment company
• pass through 90% of investment income to investors
• 70% of assets invested in private/thinly traded public corporations
• can NOT invest in foreign companies
• give assistance to managers of companies they invest in
• make loans to corporations-use some of $ to get an equity position in company
• more of a tax advantage when pass through 98%
• make loans of $2-$50 million
• borrow for lending institutions OR get more investors
• pay out large amount of income and capital gains, >=98%
• trade on exchange
• trade on NASDAQ
• can trade on OTC market

requirements BDC:

• do NOT have to be high net worth
• able to handle risk
• risk comes with higher yields>normal
• yields not growth
• good in tax deferred investments-IRA, defined contribution plan, tax deferred situation