Hedge Funds for Everyone? Don’t Hold Your Breath

Last year was a difficult year for the hedge fund industry, with returns down 6.4 percent, but the drop hasn’t stopped experienced professionals from moving away from big investment banks to set up their own firms.

Earlier this month, the Financial Times reported that a team of top traders at JP Morgan was making the leap to launch one of the biggest hedge fund start-ups of 2012. Several new Asia-focused hedge funds have also sprung up in recent months, attracting investors who are encouraged by the managers’ strong track records.

But investing in hedge funds is not for everyone.

The high fees they charge in return for the promise of substantial returns mean only very wealthy individuals or professional investors such as insurance companies and pension funds can invest.

“There are a few that deserve it but not all of them,” David Butler, founding member of Kinetic Partners told CNBC. “I think you have to be careful about which hedge fund you look at.”

Margie Lindsay, editor of the Hedge Fund Review said that institutional investors were putting a lot more pressure on managers to negotiate the fees.

But despite efforts to make the hedge fund industry less opaque, there are few signs that hedge funds will be investing money for the man in the street any time soon.

Butler said hedge funds were not looking for retail investors and would not be able to cope with an influx of retail investors.

“The product and many of the strategies are so complex they are not really designed for the retail market. Most hedge fund managers don’t want retail investors and most retail investors shouldn’t be in them,” Butler said.

Rather than selecting hedge funds themselves, individuals can get some exposure to hedge funds through pension funds, the custodians of their money, Butler said.

“Retail investors are better to do it through some other means and just accept, through their pension funds, they get some exposure,” Butler added.

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10 Large Clean-Tech Funds

Photo: Ben and Marcos Welsh | Age Fotostock | Getty ImagesClean tech has become a major destination for investors, from venture capital firms to ordinary shareholders. The large and diverse sector, which covers everything from energy to transportation to construction, touches all sorts of industries and often blurs with other areas. Clean tech, like green, was once closely associated with the socially responsible investing movement, but its sheer size today has created a wealth of investment vehicles in alternative, as well as concepts such as energy efficiency and storage. Here’s a look at the largest funds, based on market capitalization. (Data is from Morningstar). Not surprisingly, many of the select, top holdings include clean-tech industries such as solar, global water resources, fossil fuels alternatives, wind energy, global warming and carbon emissions. The timing couldn’t be better as some analysts forecast $5 retail gasoline by the summer, as crude oil prices remain well over $100 a barrel. But because clean-tech investing can be volatile, investment strategists generally advise dipping into this space as part of a larger, diversified portfolio plan. Click ahead to see 10 select, large ETFs with a strong focus on clean-tech holdings. The data are based on one-year trailing returns as of Jan. 31. By Heesun WeePosted 01 March 2012Fund size: $908.8 million 1-year trailing total return: -3.4 percent 5-year trailing total return: NASelect top holdings: Pentair, Calgon Carbon, Pall Photo: Flip Chalfant | Image Bank | Getty ImagesFund size: $256.1 million1-year trailing total return: -9 percent 5-year trailing total return: NA Select top holdings: Hyflux, Arcadis, Kurita Water Industries Photo: Sean Gallup | Getty ImagesFund size: $218.1 million1-year trailing total return: - 43.5 percent 5-year trailing total return: - 19.9 percent Select top holdings: Suntech Power Holdings, JA Solar Holdings, AMSC, STR HoldingsPhoto: Joe Sohm | Digital Vision | Getty ImagesFund size: $193 million1-year trailing total return: +1.6 percent 5-year trailing total return: NA Select top holdings: Geberit AG, United Utilities Group, Severn Trent, American Water Works Fund size: $107.7 million1-year trailing total return: -13.2 percent 5-year trailing total return: -1.5 percent Select top holdings: Schneider Electric, Pall, First Solar Fund size: $90.2 million 1-year trailing total return: - 61.8 percent 5-year trailing total return: NA Select top holdings: GCL-Poly Energy Holdings, First Solar, GT Advance Technologies Photo: Kathy Collins | Getty ImagesFund size: $89.8 million1-year trailing total return: - 33.9 percent 5-year trailing total return: NA Select top holdings: LSB Industries, Renewable Energy, First Solar Photo: Hiroshi Hara | Amana Images | Getty ImagesFund size: $66.6 million1-year trailing total return: +3.5 percent 5-year trailing total return: NA Select top holdings: Basic Sanitation Company of the State of Sao Paulo (Brazil), Mueller Water Products, American Water Works Photo: Lisa J. Goodman | Photographer's Choice | Getty ImagesFund size: $63.8 million 1-year trailing total return: -40.2 percent 5-year trailing total return: NA Select top holdings: Cooper Industries, Kurita Water Industries, Enel Green Power Photo: Shaun Curry | Stringer | Getty ImagesFund size: $29.3 million 1-year trailing total return: - 21 percent 5-year trailing total return: NA Select top holdings: Vestas Wind Systems, Greentech Energy Systems, China WindPower

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