#009 - What is a Hedge Fund?

A Hedge Fund is where you want your money to be once you are liquid for over $5mm that you can devote to a fund. Some Hedge Funds won't even take you on as a client with $5mm, which is $5mm.

You need $5mm to be a Goldman Sachs Asset Management Client. I would say that they're in the top tier of non-Hedge Fund asset managers.
Asset Managers do try to generate Alpha but they can't do it as well as Hedge Funds because their best traders go to work for Hedge Funds as they pay more.

If you are here on Linkedin and you are reading my content, then eventually, you will be making six figures, so it makes sense to be a Merryl Lynch or Northwestern Mutual client for now (free advertising lol).

Let's break down a Hedge Fund in a straightforward way. A Hedge Fund is a fund for Ultra High Net Worth investors who can invest money with a usual 12-month lock-in period with a zero risk factor to the fund manager and an 80% profit payout to the investor, meaning the fund manager assumes no losses. Usually, with a 2% payout of the principal upon deposit, hence the classic 2/20 payout to the Fund Manager.

Hedge Funds have an advantage over other funds based on how they are set up, in that they can trade both long and short positions. Traders explore short positions because they are exceptional at what they do, which is why they take the 20% profit split. Successful Hedge Funds that stay in business usually generate Alpha to the degree that the 80% to the investors still carry Alpha on the S&P.

Most Hedge Funds have a million-dollar minimum buy-in component.

Check out the World's Top 10 Hedge Funds Here:

Traders usually begin at $500k a year.

https://www.investopedia.com/articles/personal-finance/011515/worlds-top-10-hedge-fund-firms.asp