Are there special risks associated with hedge funds?
A. Yes. In addition to the general risks described for all alternative investments, investing in hedge funds may involve a high degree of risk. These investors often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. All hedge funds are unique and any investor should carefully consider all risks prior to placing money with a particular hedge fund. Specific risks can be found in the hedge fund’s offering memorandum.
