More About Private Investment Vehicles
Characteristics of private alternative investments include:
Access
These investments are often only available to accredited investors
or qualified clients (that is, individuals who meet certain net
worth, income or asset benchmarks set by the SEC). These
investments are usually open to a limited number of investors and
typically require a high initial investment.
Fees
Private investment vehicles typically have a 1-2% management and
20% performance fee annually, but may vary widely and could be much
higher.¹
Investments
These private investment vehicles generally have the flexibility
to use leverage and short sales in greater amounts than mutual
funds. While this provides the opportunity for outperformance,
there is the potential to lose some or all of the money invested,
as investments may not go in the direction anticipated.
Liquidity
Funds may be "locked up" for months or years, making it difficult
for investors to access their money
Performance
Most private investment vehicles seek to hedge against downturns
in the market and provide positive returns regardless of market
conditions. However, it may be difficult to establish appropriate
benchmarks for these investment vehicles and thus appriase
performance, particularly because managers are typically under no
obligation to report returns.
Pricing
Because there are no standards established for pricing these
private investment vehicles, it may be difficult to value your
investment at any specific time.
Regulation
For private investment vehicles, SEC registration is not
required.
Taxes
The tax implications involved in these investments are often
unclear and are more complex than other investments.
Transparency
Holdings are only available at the discretion of management.
¹ Source: www.sec.gov
 
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