Hedge Funds

[Buffalo]

Due to my hesitance in reacting to the market and unbounded optimism (i.e. stupidity) I'm now sitting at just under half whatI "should" have in my savings account based on the growth I was receiving over the last three years until January 08.

I have been at a loss what to do, over the last year the managed funds that I had chosen (three in total) were losing, but were losing less than others, although this seems to have changed recently and are now fairly in the pack of proper losers.

Searching around the internet this lunchtime I came some funds have made a growth of 14-35% over the last year. On closer inspection these are hedge funds, but from reasonably well known investors (black rock, perpetual, etc).

So - what's the catch..? I am elligible to enter these funds, but I have no experience of them. A brief google search reveals that I "must be wary" but surely that goes for any investment? Just how safe is money in these funds in comparison to a more traditional managed fund..? And is it worth the switch?

Thanks

Edited by Buffalo on Thursday 5th February 01:33

[edb49]

I suppose the big thing is that hedge funds don't track the market. So where your managed non-hedge funds were dropping when the market dropped (not necessarily in proportion though) a hedge fund wouldn't necessarily do this. Likewise, a hedge fund may go down when the market is going up.

I would just stick it all under the mattress.

[skwdenyer]

edb49 said:

I suppose the big thing is that hedge funds don't track the market. So where your managed non-hedge funds were dropping when the market dropped (not necessarily in proportion though) a hedge fund wouldn't necessarily do this. Likewise, a hedge fund may go down when the market is going up.

I would just stick it all under the mattress.

How many "hedge funds" are actually hedge funds these days? With so much competition, there seem to be very few true hedging opportunities left which don't require insane levels of leverage to make any hay from. With debt not easy to come by, and counterparty risk seemingly alsmost unknowable (if Lehmans can go...), how are they continuing to function as anything other than gambling operations?