What it a Single Manager Hedge Fund?

In some cases, you may come across a hedge fund which is deemed to be a ‘single manager hedge fund’. In this instance it’s simply a hedge fund whereby there is one person running it as opposed to an multi management hedge fund (funds of hedge funds) whereby numerous investments are occurring at the same time.

Of course with the latter, there is the advantage of your investment working better for you since your money is being distributed amongst various projects, across various managers who each have their own expertise within a specific sector.

In comparison, in a single manager hedge fund you would be investing your money within one specific category. For the sake of comparion, let’s have a quick look at what each one might entail.
1) Single Manager Hedge Fund – This may involve in investment in precious metals (gold, platinum and silver) and as such they’ll spend their time in making sure that your investment remains as secure as possible in their remit.

2) Funds of Hedge Funds – This could be regarded as more of a conglomerate of hedge funds. By this, we mean that when you invest your money, it goes into a collective pot if you will of various hedge funds. It usually consists of three of more hedge funds and your money could be invested in precious metals, IT and also oil.

 

Which one is a better investment choice?

The answer for this really depends on your own personal circumstances and how much money you have to play with. With a single management hedge fund, if for whatever reason your investment had to fall dramatically, you’ll be wiped out and your financial commitment has been lost. Conversely, with a funds of hedge fund management you’ve got much greater financial security in that the likelihood of all the funds collectively failing is much less than a single fund failing. However, this type of hedge fund investment generally has higher rates of fees since you’re paying fees to each individual manager as well as the head manager of the fund that is running the whole setup.

 

Regardless of what type of fund you choose to use, you’re moreĀ  likely to earn a higher rate of return than you would if you were investing your money in bonds, stocks and shares, which in themselves pose a potential risk. However, before investing in either type of fund, or setting one up yourself, it’s crucial that you ensure that the managers, or indeed yourself have the adequate qualifications to carry out the task in hand.

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