The short answer, though I'm no securities lawyer, is "yes."
The typical hedge fund investor has to be an "accredited" investor,
and among the definitions of an accredited investor is someone who
invests other's money for a living, such as a mutual fund's
stock-picker. He could be a homeless guy, but if he works for Janus,
or whoever, he's an accredited investor, just like the minimum
$1,000,000 worth hedge fund investor.
Hedge Funds were created because there are laws that pick the pockets
of savvy investment advisors by capping their ability to profit along
with their clients. It is difficult to say what the reasoning
underlying this rule was, because similar laws requiring only nine
large accounting firms to be allowed to audit corporation books and
stock prices to be above five dollars per share have since proven to
be as pointless as diversification.
From the little browsing I've done, it looks like a hedge fund is as
likely to be a commodities trader as an ostrich farmer as what one
would expect -- a stock and commodity-trader leveraging situations and
trends with derivatives. We all know a house costing $600,000 that
used to cost $60,000 probably makes the dollar worth less, whether or
not a burger is 99c, much though some would argue one into the ground
over perceptions.
The use of options has been widely discouraged since the 90's, but if
a fund manager's "aggressive" leeway includes any derivatives, a hedge
fund would be fine. What might hold a fund manager back, though, would
be the bookkeeping end, since it would make for a better paper trail
to use the hedge fund manager as manager of part of the fund, than to
use offshore accounts with underinsured banks. The one hedge fund LP
"application" I saw also included some insane disclaimers no fund
manager could sign.
Hope it helps. |
