First Things First: Why Invest in Hedge Funds at All?
When you look at the market today, there are a few things worth noting:
- Inflation rates have mostly outpaced interest rates
- Bonds and savings funds are no longer viable investments
- The stock market and other traditional investment vehicles yield only mediocre returns
In other words: Your money is constantly losing value due to inflation, while most publicly available investment vehicles barely generate returns significant enough to counteract this trend. If you're looking to not just protect your wealth against inflation but actively grow it, the situation looks even more dire.
In stark contrast, hedge funds are still able to generate significant returns. CARL's quantitative strategies, for example, offer 15%+ targeted returns on your investment. Try getting that much out of stock trading! CARL believes that hedge funds – and quant funds in particular – are the only way for ordinary people to make the most out of their wealth. That's why CARL offers easy access to sophisticated quantitative investment strategies to accredited investors.
Hedge funds can provide significantly higher potential gains since they are largely unregulated by the U.S. Securities and Exchange Commission (SEC). That means they can put money into alternative investment vehicles, which most individual investors, mutual funds, etc., have no access to.
What You Need to Do to Be Allowed to Invest
While hedge funds aren't subject to most SEC regulations, the commission does restrict access to them. The Securities and Exchange Commission mandates that hedge funds are only open to so-called "accredited investors". In other words: Whenever you contact a hedge fund firm to discuss becoming an investor or when you set up your CARL account to get access to our investment strategies, you're legally required to prove that you qualify as an accredited investor. This means you have to provide documentation showing that you meet at least one of the following requirements:
- Your annual income exceeds $200,000 – or $300,000 together with your spouse (or spousal equivalent)
- Your net worth exceeds $1,000,000 – this excludes the value of your primary residence
- You hold in good standing a Series 7, 65, or 82 license
Once you can prove that you qualify under any one of these requirements, you are legally allowed to invest in the fund of your choosing if the fund currently takes on new investors.
Can Pensions Invest in Hedge Funds?
Many pension funds use hedge funds to increase the potential gains of their portfolios.
Naturally, they often only seek to diversify their existing portfolios to limit the risk they're exposing themselves to by putting some of their money into these funds. But the targeted returns are just too good to pass up when you're working to secure someone's retirement financially.
Can Companies Invest in Hedge Funds?
Companies can act as so-called "institutional investors" to put their money into hedge funds. However, few companies do so since the large minimum investments and long lock-up periods make this a very illiquid investment proposition.
Companies can limit these risks by investing with CARL since our strategies only require a $20,000 minimum investment and have no lock-up periods, allowing you to withdraw your money on a monthly basis.
How Hedge Fund Investing Used to Work
Hedge funds generally aren't open to the public. This means that even just finding out about the existence of a fund may require a lot of research on your part. In some instances, you'll only really get access if you know someone who is already part of the fund. And sometimes, you might find out about a great firm only to be told that they aren't currently open to new investors.
Investing in the fund of your choice was challenging, as you needed to do all of the following:
- Find out that the fund exists at all – research can be done online, through listings, or with good old-fashioned legwork in cities like New York, where many hedge funds are headquartered.
- Contact the firm, the hedge fund manager, or someone who's already investing in the fund to gather non-public information on how the firm's investment ideas work.
- Apply to become an investor, which includes proving your accredited investor status.
- Make a minimum investment – most funds require you to invest a minimum of $100,000 or more to even be allowed to become an investor.
- Keep investing or withdrawing your money according to the fund's rules, paying the respective fees to the hedge fund manager (typically a management fee and a performance fee).
As you can see, hedge funds have historically not been easy to get into. Even if you qualify as an accredited investor and are thus legally allowed to invest in these funds, you might never be able to find the perfect one for you. And if you do, the hedge fund manager may require you to make a minimum investment large enough to tie a significant portion of your wealth to the fund.
CARL believes this approach only serves to keep ordinary U.S. citizens away from the only viable way to invest their money in today's economy, which is why CARL works differently.
How CARL Has Changed the Game
With CARL, all you need to do is set up an account and provide the required information to prove your accredited investor status – and you're in! With an investment minimum of only $20,000, you can invest freely in any of our quant funds, choosing whichever investment strategy best suits your portfolio.
Take full control over your investments with the CARL app – get an overview of your chosen fund's performance, withdraw money and react quickly to sudden market changes, no matter where you are!
Your CARL account is connected to a banking account of your choice, allowing you to freely invest or withdraw money on a monthly basis. This means the money you have invested is significantly more liquid than other hedge funds, which often have very lengthy lock-up periods.
Is Investing in Hedge Funds Safe?
As any portfolio manager, fund manager, hedge fund analyst, or investment banking expert can attest, investment always carries some risk. Hedge funds are no exception since they are specifically designed to make even riskier investments compared to mutual funds, ETFs, and similar funds.
However, hedge funds are only as risky as the risk to which they choose to expose themselves. One fund may be designed to invest primarily in financial derivatives, private equity, and other risky assets and asset classes, with little hedging to limit market exposure. Another fund may focus entirely on more reliable investments, making extensive use of hedging to reach net-zero market exposure.
As always, the devil is in the details, and there are many different hedge fund strategies, leading to wildly different amounts of risk for investors.
How to Use Hedge Funds as Part of Your Portfolio
Within the context of your investment portfolio, hedge funds can have various roles. Perhaps you want to invest in one of CARL's high-yield quants with 15%+ targeted returns to generate the lion's share of your portfolio's overall profit potential. Or perhaps you're looking for a fund using long and short positions to aim for absolute return at low volatility, giving you a reliable source of income no matter how the overall market evolves.
Be sure to take advantage of the quantitative approach! Data-driven quants have consistently outperformed traditional hedge funds in recent history.
Whether you're looking for a single investment vehicle that promises hands-off profits or you're using hedge funds to diversify your portfolio, CARL has you covered – with many different strategies, all easily accessible via the same convenient mobile app.
Get Started
3 Easy Steps to Start Investing With CARL
Investing in quants is as easy as pie if you've got CARL on your side. Investors can set up an CARL account quickly and easily.
Set Up Your Account
Quickly and securely create your account, verify your investor status and become a member of our community.
Analyze Investments
Using the tools within the CARL app, determine which strategies at what allocations are right for your investment goals.
Fund Your Investment
Simply save your portfolio settings and on the next strategy funding cycle your investment will be live!
With CARL, Investing In Hedge Funds Is Easier Than Ever
With a low investment minimum of $20,000, no lock-up periods, and convenient everyday control over your assets, thanks to our mobile app, CARL has lowered all the hurdles for investing in hedge funds. Today, access to sophisticated quants is no longer a privilege of the uber-rich but available to any accredited investor. Set up your CARL account today to take full advantage of the power of quants to grow your wealth, even in the face of record inflation.