During the financial crisis two years back, the one which suffered the most are the investments banks. But there was a rescue effort made by the US federal authorities which made life easier. But continuous failure in the investment banking sector and as a result the heavy burden that is being faced by its banks, led to the rise of hedge funds. So for those who are always ready to become high-risk investors and it is the right investment choice.

Many people want to know what is a hedge fund? There are differences between hedge funds and other investment funds like the exchange traded funds or the mutual funds. The difference lies in the degree of regulation. Public investment companies hold the mutual funds. It falls under Securities and Exchange Commission (SEC). But on the other hand, it is free from Securities and Exchange Commission (SEC). Rather, it is ideal for those investors who are willing to take greater risks.

All of this is made possible by ensuring that only wealthy individuals are involved in the investment, who meets certain criteria for income. Those investors are known as ‘accredited investors’ who must either have at least a net worth of $1 million or an annual income of at least $200,000 which is secure. In this way much of the middle income people of US can participate in it. But companies with $5 million or more invested assets may also put their money on it. Moreover, institutional investors make up the major portion of investors under the hedge fund management.

An off shore tax haven is registered with for the hedge funds, so that tax efficiency could be maximized for its trading operations. But their regular running will be in New York or London which are their mainstream financial centers. The point man for the funds is the hedge fund manager. He or she has the authority to decide or direct, the strategy for it at their service. This kind of strategy is basically outlined for the investors but it can cover a wide number of operation staff and investment approaches. But the buck halts with the manager of the funds. So it mostly rely on their trustworthiness and reputation so that wealthy clients could be drawn in.

So, if you know that what is a hedge fund, one can see that this is an opportunity to put in your wealth. It is definitely different from other types of funds and is going to bring about a definite change in the way people look at investing their wealth.