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What benefits does a Hedge Fund offer?

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Some investors may regard the limited investor pool and lack of disclosure as benefits in and of themselves. Some other potential benefits include:

Higher Returns: Although higher returns are in no way guaranteed within a hedge fund, the ability of hedge funds to capitalize on financial instruments unavailable to closely regulated funds allows hedge funds a greater chance of success � if such investment strategies are used in an informed, timely fashion. Moreover, since many strategies employed by hedge funds operate independently of the rise or fall of the market, hedge funds offer investors an opportunity for good returns even in a down year for the market.
Less Risk: In many cases hedge funds are more diversified than, as an example, mutual funds. Particularly in situations where the diversified investments rest in unconnected assets, such diversification decreases total portfolio risk, and hedge fund managers enjoy added flexibility because of the number of investment strategies available within a hedge fund.
Manager Incentive: Unlike mutual funds, which charge fees without regard to performance, hedge fund managers earn much of their money through incentive-based fees. Consequently, hedge fund managers are likely to diligently pursue sound investment strategies in order to increase their own return.

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