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FAQ

What does it mean to "hedge"?

Are all hedge funds hedged?

Are all hedge funds highly aggressive?

What types of strategies do hedge funds employ?

Who typically invests in hedge funds?

What is an Accredited Investor/Qualified Purchaser?

What is the minimum investment?

What fee structure do most hedge funds adopt?

Are hedge fund returns reported before or after fees?

What are "offshore" hedge funds?

Who can invest in offshore hedge funds?

Do I still pay fees even if the fund loses money?

What is a hurdle rate?

What is a high water mark?

What is a lock-up period?

What can I get for free from Eurekahedge?

Why do your charge for your hedge fund data?

Can the returns posted on Eurekahedge differ from the actual returns of the fund?

How many funds are included in the Eurekahedge Database?

What type of reporting style do the funds in the Eurekahedge Database use?

What is the percentage of North American and non-North American onshore funds versus offshore funds in the Eurekahedge Database?

In what format is the Eurekahedge Database presented?

How often are updates to the Eurekahedge database made available?

Who can subscribe to the Eurekahedge Database?

How does Eurekahedge calculate the statistics for the funds?

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What is a "Hedge Fund"?
Hedge funds are investment vehicles that explicitly pursue absolute returns on their underlying investments. The appellation "Absolute Return Fund" would be more accurate, not least as not all hedge funds maintain an explicit hedge on their portfolio of investments. However the "Hedge Fund" definition has come to incorporate any absolute return fund investing within the financial markets (stocks, bonds, commodities, currencies, derivatives, etc) and/or applying non-traditional portfolio management techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in any number of strategies and they are perhaps most readily identifiable by their structure, which is typically a limited partnership (the manager acting as the general partner and investors acting as the limited partners) with performance related fees, high minimum investment requirements and restrictions on types of investor, entry and exit periods.

What does it mean to "hedge"?
Not, in fact, an esoteric gardening term, to "hedge" means to manage risk.
Any given money manager may make an allocation/investment that could be described as speculative; if this same manager simultaneously makes an allocation to an allocation/investment specifically designed to balance or counter-act any negative performance from his speculative position then this would be his hedging position.
There are many types of perceivable risk - Market, Interest rate, Inflation, Sectoral, Regional, Currency, etc. Hedge fund managers utilise the complete arsenal of financial weapons (holding cash, short selling, buying selling or swapping options, futures, commodity and/or currency futures, etc.) and are expert in concocting hedging positions for most conceivable risks.

Are all hedge funds hedged?
No (and this raises the question of how they can call themselves "hedge" funds as touched on elsewhere), some funds may be long-only in stocks, and may even use leverage- making them explicitly speculative and "un-hedged". The correct questions to ask regarding hedge or absolute return funds revolve around how much perceivable and quantifiable risk underlies its returns. Thankfully, there are lots of clever mathematical formulae and clever mathematical people who will be able to help you with this.

Are all hedge funds highly aggressive?
No again. In fact a true hedge fund is, in theory, less speculative than a long-only "traditional fund". Of course there are some real bat-swinging, aggressive hedge funds, but there are also many others that explicitly and methodically pursue consistency of returns and/or preservation of capital. Of course this is not sensationalist or sexy, so this aspect of hedge fund finance seldom sees the light of day within the media.

What types of strategies do hedge funds employ?
You name it and a hedge fund somewhere is probably doing it (or will be able to)! From buy-and-hold to currency arbitrage to futures and options to distressed debt positions, hedge funds can allocate to any and all (depending on their declared style and strategy). The majority of the hedge fund universe is involved in relatively plain vanilla positions, but sexy finance makes the news so hedge funds collectively are invariably associated with the arcane minority.

Who typically invests in hedge funds?
Usually defined as "Accredited Investors", various institutions, corporate treasuries, endowments, fund of funds, family offices, private banks and pensions invest in hedge funds.

What is an Accredited Investor/Qualified Purchaser?
This can vary from jurisdiction to jurisdiction, depending on the investing process in question and is something that each individual should verify within their own Jurisdiction prior to investing with a hedge fund. Put simply, if you cannot afford to lose the money you invest then you should not be looking at hedge funds as a viable investment route.

What is the minimum investment?
The minimum investment varies from fund to fund. Although some funds are charging as low as US$10,000 these are very much the exception and a common starting range would be between US$250,000-$500,000. Established funds can have much higher minimums; $10,000,000 or more, depending on the fund and manager. The fund manager can waive the minimum at his sole discretion but this is usually only undertaken to accommodate serious investors who stipulate an intent to allocated substantially more than the stated minimum, depending on how this initial allocation performs.

What fee structure do most hedge funds adopt?
Hedge funds fee structures vary, dependant on jurisdiction, domicile and, most importantly, investor base. The most common fee structure is the standard "1 and 20": a 1% management fee (% of assets) and 20% performance fee (% of profits), annually (Normally the management fee is collected in .25% quarterly trenches, in advance, and the performance fee is calculated annually). In addition to this, there are other performance-related restrictions and expansions on the collection of fees: high-water marks and hurdle rates being the most common.

Are hedge fund returns reported before or after fees?
Most funds report their returns from previous years "net of all fees." (net of management fees and incentive/performance fees). However, some funds report gross returns or returns net of management fees but gross of incentive /performance fees. Other variations occur but, regardless of which reporting method is received, the majority of hedge funds stipulate that pre-audit figures are subject to adjustment after year end (usually a minor or nominal adjustment).

What are "offshore" hedge funds?
Offshore hedge funds are vehicles, registered/domiciled in offshore jurisdictions, designed to allow investment in a fund without being exposed to the strictures of tax law in any given onshore legislation.

Who can invest in offshore hedge funds?
Anyone with offshore money can invest in offshore hedge funds. Getting the money off shore without incurring the same tax the offshore structure has been established to avoid is the issue here and this differs from legislation to legislation.

Do I still pay fees even if the fund loses money?
The investor always pays the management fee on assets held within the fund, but performance fees are applicable only after positive performance has been achieved (even then a hurdle rate or high water mark may grant the investor exemption of performance fee payment).

What is a hurdle rate?
The established minimum return an investor's investment must make prior to the application of performance/incentive fees.

What is a high water mark?
Where a hedge fund applies a high water mark to an investor's money, this means that the manager will only receive performance fees, on that particular pool of invested money, when its value is greater than its previous greatest value. Should the investment drop in value then the manager must bring it back above the previous greatest value before they can receive performance fees again.

What is a lock-up period?
This is the time period that you must hold your assets ("lock-up" your money) within a fund before they can be removed.

What can I get for free from Eurekahedge?
There is no such thing as a free lunch, so we do not provide food but free information instead; via our monthly news, interviews and our archive - in return we ask for all users to register. You will receive access to our newsletters and indices pages without any further obligation.

Why do your charge for your hedge fund data?
Eurekahedge prides itself on delivering a data service that fits the needs of our clients. We are working to a world class vision and this means that we must plough fees generated back into our business to continue tracking, updating, and interviewing hedge fund managers globally. With the anticipated high level of start-up activity and the rising level of attrition in the industry, maintaining an accurate overview of the universe requires the best possible resources. This is what Eurekahedge charges a premium to maintain.

Can the returns posted on Eurekahedge differ from the actual returns of the fund?
Of course, and we do not audit the figures provided so there are no guarantees. However, what you get with Eurekahedge is an authorised NAV figure, either direct from the investor update list or from the fund administrators.

How many funds are included in the Eurekahedge Database?
There are currently over 30302* funds (inclusive of obsolete funds to constitute a complete, historically accurate, universe) included in the Eurekahedge Database with new funds being added daily.

What type of reporting style do the funds in the Eurekahedge Database use? The Eurekahedge Database contains funds reporting performance net of all fees.

What is the percentage of North American and non-North American onshore funds versus offshore funds in the Eurekahedge Database?
The Eurekahedge Database contains an approximate 50/50 North American onshore/ offshore split, and our non-North American coverage has an approximate 30/70 onshore/ offshore split

In what format is the Eurekahedge Database presented?
Eurekahedge makes it data available either through a subscription to our own database online or through data-feeds, issued on regular basis to our premium clients. Our data-feeds, to date, have been compatible with any format asked of us.

How often are updates to the Eurekahedge database made available?
The Eurekahedge Database is updated on an ongoing basis, throughout the working day. We release our datafeeds and indices data every day at 00:00 GMT and these are made available to download from our website at this time.

Who can subscribe to the Eurekahedge Database?
The Eurekahedge hedge fund database suite is available to accredited investors or affiliated professionals only. We do however make exceptions for academic institutions and their members who require market leading data on the hedge fund universe for research purposes.

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