Keeping up with hedge fund firms and funds news and trends can be a daunting task. Because the firms themselves employ such a wide variety of investment strategies to manage their funds, they each respond differently to economic stimuli and market fluctuations. Tracking these changes is essential for individual and institutional investors alike who wish to ensure efficient and intelligent management of their money.

In investing, the advice and market savvy of a seasoned broker or financial advisor are irreplaceable, but there are a variety of online resources you can use to conduct your own research and improve your chances of turning a profit. When tracking hedge fund news and trends on the Web, keep the following points in mind:

1. The Securities and Exchange Commission (SEC) doesn’t require hedge funds to register with them, so the same federal laws as traditional investment vehicles, such as mutual funds, don’t bind these funds.

2. Business newspapers, performance indexes and hedge fund databases provide easy-to-access information on firms and funds.

3. Hedge fund journals and magazines publish in-depth research and analysis of the best-performing firms and funds. These offer deeper insight into hedge funds and other alternative investments than papers and databases.

Action Steps
The best contacts and resources to help you get it done

Scan business papers for breaking news about hedge funds

Although they may not be hedge-fund specific, business newspapers contain the latest news about the financial industry. Since the papers and their corresponding websites are updated at least daily, there are few better sources for breaking news regarding the national and international markets where hedge fund companies do their investing.

I recommend: The Wall Street Journal is one of the leading sources of business and financial news online. Google Finance also provides investors a wealth of relevant information and offers excellent market summaries and charts, and a hedge fund company list. Finally, Reuters has a section of its website devoted to hedge fund firms and funds.

Use databases to track specific hedge funds

Business papers are helpful to investors by providing a broad overview of current events in the financial sector. However, when you need more information about a specific fund's performance, you're better off consulting a hedge fund directory or database. These are rarely free, but they occasionally offer free trials for short periods of time.

I recommend: Morningstar and Barclay Hedge both keep databases that track the performance of roughly 6,000 different hedge funds. Barclay Hedge also offers a global hedge fund database that tracks nearly 6,400 funds around the world.

Review performance indexes to track broad trends with hedge funds

Just as the S&P 500 and Dow Jones Industrial Average measure the performance of stocks, certain indexes measure the performance of hedge funds. While they don't track specific firms or provide a list of hedge fund companies and their performance, they do provide an accurate glance at the hedge fund sector as a whole. Thus, they're an invaluable tool for tracking and monitoring hedge fund trends as they develop.

I recommend: The Dow Jones Hedge Fund Indexes organizes funds by strategy and provides both daily and monthly performance summaries. For a broader selection of indexes and tools, visit the website of Hedge Fund Research.

Find research reports in journals and magazines dedicated to hedge funds

Most daily financial papers, blogs and websites don't publish detailed research reports and analysis. To get deeper insight into the trends and developments in hedge funds, you'll need to consult specialized journals and magazines. These also often publish information on different firms for hedge funds, which can be helpful for people in the process of selecting a fund for their investment.

I recommend: Institutional Investor Magazine and its sub-publication Alpha Magazine are two of the leading online resources for hedge fund reports and analysis. Both offer a two-week free trial or premium online access with a paid subscription. HedgeFund.net, produced by Channel Capital Group, also publishes a variety of research reports available free of charge or for purchase. Additionally, the site maintains an extensive hedge fund listing.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Sign up for Google Alerts and specify 'hedge fund news' and 'hedge fund trends' as the terms of its search. You'll receive daily emails compiling the latest blogs, articles and news reports on the hedge fund sphere.

Hedge funds look like an investment possibility for your business. Hedge funds can be risky, but they can yield very large and profitable returns. Unlike mutual funds, hedge funds are not regulated by the government. This is one of the major reasons why hedge funds have a reputation for being secretive. Firms for hedge funds don’t have to disclose their positions or trading strategies. Hedge fund companies also don’t have to disclose their profits and returns.

Nevertheless, investors are attracted to hedge fund firms and funds. Some of these investors that participate in hedge funds are not just wealthy individuals, but institutional investors invest in these funds as well. To be a successful investor in hedge funds, you need to:

1. Find out as much information as possible on firms for hedge funds.

2. Discover the hedge funds investment requirements.

3. Get to know the hedge funds’ management team.

Action Steps
The best contacts and resources to help you get it done

Search for hedge fund firms and funds online

The best way to learn about hedge funds and what they invest in is by looking on the Internet. If you are new to hedge funds, there are resources that can educate you on how they work. These websites will have a hedge fund directory of hedge fund firms. Make a hedge fund company list. Then if the hedge fund company has a website, research it.

I recommend: You will find valuable information at HedgeCo.net on hedge fund organizations, but you will have to be a member of this website. If you’re thinking about investing overseas, HedgeCo.net has information on offshore hedge funds. You’ll also want to check out Harvard Business School Baker Library Bloomberg Center. It has a database featuring hedge funds not only in North America, but also in Europe, Latin America, and Asia.

Contact the hedge fund firm's investment manager

You have made a list of hedge fund companies that you are interested in investing in. The next step you should do is make a list of the hedge fund company's investment management team. Look for key executives or the owner of the fund. Don't be afraid to contact the members. After all, you're going to be putting significant money into the hedge fund. You have a right to get answers.

I recommend: Look on Private Equity Info’s website for information on firms for hedge funds’ key executives and owners. You’ll also want to subscribe to Barclay Hedge. This site has a hedge fund directory of more than 5,000 hedge firms and will also give you the key names of managers and their contact information.

Find out how hedge funds invest

Not only will you want to know what the hedge funds are investing in, but how they invest. It's possible that hedge fund companies' investments in certain areas are not suitable to your style.

I recommend: As was previously mentioned, hedge funds have a reputation for being secretive. Morningstar, on the other hand, mentions that it the same financial information for hedge funds that it has for stocks, exchange traded funds, etc. You'll have to sign up for it, but you’ll want to use this website as a valuable tool. Austin Capital Management tells you how it invests, including short/long equity or relative value/arbitrage.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Keep track of the hedge funds that interest you. Ask around for hedge funds that have good word-of-mouth reputations.

To the average investor, hedge fund firms and funds key terms may seem daunting and even mystical. Once you familiarize yourself with the basic terminology used by hedge fund companies, however, you'll gain a good understanding of how they work, putting you one step ahead of many other investors.

Although hedge fund firms employ a wide variety of different investment strategies to beat the market, they have a few things in common. Most importantly, as their name implies, they try to neutralize their financial risk by hedging their investments. Hedging is often what allows firms for hedge funds to post good returns, even during economic downswings. Hedge funds also have the following characteristics in common:

1. Hedge fund organizations typically hedge their investments with a variety of techniques, including short-selling.

2. Hedge funds charge two important kinds of fees: management fees and performance fees.

3. Hedge fund managers often use high-water marks and hurdle rates to determine their fees.

Action Steps
The best contacts and resources to help you get it done

Learn about the different investing strategies used by hedge funds

Two important techniques hedge fund managers use to earn profits are short-selling and leveraging. When combined with traditional position trading, short-selling, or borrowing and then selling stocks whose price is about to fall, allows hedge funds to generate returns in uncertain or volatile market climates. Many funds also use leveraging to magnify their profits, although this exposes them to a greater degree of risk.

I recommend: Before investing any money in hedge funds, read the Securities and Exchange Commission's definition of hedge funds and funds of hedge funds. Also, you can read up on different hedge fund management strategies at HedgeFund.net.

Research fees before investing in a hedge fund firm

Hedge fund managers generally charge their investors two types of fees. The first, called the management fee, is usually a small portion (1% to 2%) of the client's total invested assets. The second, called the performance fee, is much larger (about 20%) and comes out of the profit earned by the investment. It's very important to evaluate both of these fees before tying your business' money up in a fund.

I recommend: Morningstar and Hedge Fund Blogger.com both publish an extremely thorough hedge fund directory that includes detailed information on the fees, returns and net assets of funds around the world.

Check hedge funds for high-water marks and hurdle rates

Although many hedge funds do not offer them, especially when demand for their investment services is high, high-water marks and hurdle rates can protect investors from risky management decisions. Before a hedge fund manager receives performance fees on a fund with a high-water mark, the value of that fund's assets must exceed its previous greatest value. A hurdle rate is the minimum return an investor must receive before paying the performance fee. Occasionally, funds operate with both regulations in place.

I recommend: TheManager.org has published a brief but informative primer on high-water marks, hurdle rates and other regulatory features of hedge funds. It can also be helpful to compare a fund's hurdle rate or high-water mark to its history of returns. HedgeCo.net operates a hedge fund database that allows you to do this.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Remember that hedge funds are private investment organizations and the SEC generally doesn't regulate them. Always research the history of a fund and its manager before investing.

With a small number of investors putting up a significant amount of money, hedge funds are heavily regulated because of their high risk. Those managing these funds must register and comply with detailed rules. They are subject to investigation into fraud. While some laws and regulations have been outlined for quite some time, new rules are always either in the proposal stage or waiting to be approved.

Because of the revolving nature of hedge fund firms and funds laws and regulations, you'll want to stay on top of your obligations as a hedge fund company. You can do that by performing research on your own, or for added security you can hire a lawyer to help you navigate the rule changes effectively. Consider this additional information:

1. Hedge fund firms and funds laws and regulations define hedge funds as alternative investments, putting them in the category of non-public offerings.

2. Laws spell out fees that hedge fund services can charge.

3. Federal regulators investigate fraud in part by checking with investors to see if they are receiving the same financial information from the hedge fund company as the company is registering.

Action Steps
The best contacts and resources to help you get it done

Look to regulatory agencies to spell out laws governing hedge fund firms

The U.S. Securities and Exchange Commission is the main federal governing body regulating hedge funds, but there are other federal regulators that have an overriding influence in the formation of laws and regulations.

I recommend: Check this roundup of U.S. Securities and Exchange Commission rules and regulations. The Financial Industry Regulatory Authority answers investors' questions about risks.

Review a summary of hedge fund firms laws and regulations

Instead of trying to decipher the intricacies of legal language, look to other resources that can explain hedge fund rules in plain speak. Summaries and answers to frequently asked questions can help you make clear in your mind the laws governing hedge fund firms. Alternatively, consult with your lawyers to get a plain explanation of new rules.

I recommend: For a brief overview of some key rules, check out the Hedge Fund Law Blog. The Hedge Fund Regulation Corner offers detailed information about compliance, and also covers the topic of fraud.

Find a hedge fund directory of related organizations that influence regulations

It may be helpful to learn more about organizations involved in the hedge fund law decision-making process. Your best bet is to educate yourself on these organizations, plus consider membership to gain access to educational workshops about hedge fund laws and regulations.

I recommend: Find U.S. Commodity Futures Trading Commission current rules as well as proposed regulations. The National Futures Association offers information on compliance.