Question: Who Invests in Hedge Funds and Why?
Answer: The primary investors are wealthy individuals and institutions. They typically have a great deal of funds to invest, and can weather significant downturns in their portfolio in their quest for higher returns. Many of these investors are trying to outperform the market to recover losses incurred during the stock market crash of 2000. In addition, many pension funds are realizing they may not have the capital needed to cover the mass of retiring baby boomers, and are trying to outperform the market to cover these obligations. Unfortunately, the risky nature of hedge funds, and their lack of regulation, means these pension funds are less likely to cover their commitments.
