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Rahul Jain

 


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Personal Finance Consultant and InvestorFeb 23

Understand Hedge Funds and whether there are options for retail investors to invest !!


Profile photo for Rahul Jain

Rahul Jain

Personal Finance Consultant and InvestorFeb 23

What is your review of Hedonova?

With the global markets fluctuating significantly due to various factors like Russia-Ukraine standoff, it’s become increasingly essential to explore additional investment options or asset classes other than the traditional options like stocks, mutual funds, bonds gold or fixed deposits. And that’s how I came across a hedge fund called Hedonova (Delaware).


Typically, Hedge funds have very large minimum investment requirements. But Hedonova allows an investor to invest in hedge funds for as low as $1,000. I was a little surprised, since usually such opportunities are only available to accredited investors (high net worth, high income, and whose asset size is fairly large).


But before going ahead, let’s understand what hedge funds are how are they different from Mutual Funds. It is an actively managed investment pool which deploys pooled funds from investors across various stocks, debt and alternative investments.


Also, unlike mutual funds, hedge funds can invest in alternative assets like real estate, private equity / start-ups, art, NFTs & a lot more and hence can be considered to be much more aggressive or risky in nature. This concept was popularized in the US first and currently there are over 3,600 hedge funds in the U.S. and the number is constantly growing up.


I’ve evaluated the Pros and Cons of Hedonova:


Pros:


Low Entry Barrier: Minimum investment is only $1,000

Open for investment globally: Allows both US and international investors alike

Diversification: Hedonova offers 12+ alternative assets like Wine, Cryptocurrencies and NFTs, Listed Equities, Start Ups, Real Estate, Equipment Finance, Litigation, Finance, Art, Agronomy, Collectibles, Students’ success, P2P Lending, Music Royalties etc.

Investment across all these alternative categories in one fund.

Return generation and Consistency: Hedonova has generated approx. 15% higher absolute returns over S&P 500 over the same comparison period and has consistently beaten the index

Low correlation to stock market and high returns per unit of risk (Sharpe Ratio = 2.66).

No interrelations between multiple asset classes, which is a very important metric in alternative investments.

Cons:


High Risk: Being a hedge fund, it carries high risk and is aggressive in nature.

Risk of Overdiversification: While there are multiple assets for diversification, it can also lead to confusion among the investor. So read carefully before investing.

Geo-Political Risk: In addition to diversification across asset classes, this fund also diversifies investments across the world (image below). This does bring in diversification but also increased geo-political risk.

Currency Risk: It carries currency risk as it invests in multiple countries and takes investments in USD. However, may be beneficial for investors in developing economies like India as dollar appreciation adds to your returns.

Hedonova is probably one of the few companies which offers such good diversification and allows anybody to be able to invest without being an accredited investor. Also, constant outperformance is also critical to any investor and it has been able to achieve that.


Generally, I do not write about specific funds or companies but really found this fund unique and useful & hence reviewed it.


Hope you find this review on hedge funds and Hedonova helpful and insightful. Pls do share your feedback or questions in the comments section.


PS: Pls do not treat this as an investment advice. Identify your goals and risk appetite and invest accordingly or consult your financial advisor. Understand the product and then invest in it.