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Over the course of the last several years, during which the global economy plummeted downward, there have been a lot of investors who have lost a lot of their capital as a result of market losses. Because of this, more and more people are concerned about investing and they want to be sure they make the best choices for making their money work for them and grow. As a result, there has also been more interest by investors in learning about hedge funds to help them meet their financial goals.

Some people who are new to investing might get mixed up as far as understanding the difference between mutual funds and hedge funds. Mutual funds are highly regulated by the SEC in the United States, and by other financial governing bodies in other countries. A hedge fund, on the other hand, is more of a private investment vehicle and is very loosely regulated, and these pooled funds are usually limited to a maximum of 100 investors.

Another interesting thing about hedge funds is that because they are private investment groups, you will not find them advertised the way the big mutual funds are. In fact, those who manage hedge funds are not allowed to advertise and investors typically learn about these funds through word or mouth, through research, or through a broker who has a connection to a hedge fund manager.

Some people say that hedge funds are not regulated at all, but this is not quite accurate. While investors do enjoy a much greater degree of freedom in how they operate and how they invest the money in their funds, they still do have some guidelines and regulations they must operate under. These regulations do vary depending on where the operating office of the fund is located. In many instances, the legal location and the physical location of hedge fund services are in different places, usually in two different countries.

A hedge fund manager will often register the actual investment fund in one of the many offshore locales that is considered a tax haven. This is done to help the fund grow as much as possible without an undue tax burden, allowing the capital in the pool to grow more quickly. Individual investors will still have tax consequences upon withdrawing their profits, depending on the jurisdiction in which they live.

Many times it is difficult to learn a great deal of information about the hedge funds that are available for investment. This is because they are considered to be private investments and because no financial details about operations, investments, profits and earnings are required.

It is speculated that the global hedge fund industry controls an enormous amount of assets, into the hundreds of billions of dollars, but because investors are not required to provide any governing agency with annual reports, the exact numbers are unknown. This aspect scares off some investors, but for those looking to diversify their investments it is worth learning more about hedge funds to determine if they are a good investment vehicle for part of your portfolio.

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