Buyer Beware: Hedge Funds to be Allowed to Advertise to Public

In a move which is being seen as particularly risky by many, the US Securities and Exchange Commission is paving the way for hedge funds and a variety of other investments to advertise and promote themselves to the general public.

This could mean everything from television adverts to cold calls, with funds desperately vying for your investment, if you’re an accredited investor of course. Nobody is quite sure just how widespread the advertising will be, but there certainly is potential for a huge amount of coverage.

There are two major problems with this. Firstly, there are going to be a huge number of people caught up that simply don’t know what they’re doing. This means that there are going to be individuals who lose a considerable amount of money because they’ve been persuaded into risking their money. Many would argue that this would their own fault, but others believe that the authorities have a duty to protect those who could be vulnerable to losing money.

Secondly, we should be concerned about why these funds need to branch out in the first place. Surely those who have the money and the knowledge to invest are already doing so? The issue for many funds is that, while they’re doing well currently, returns for their big investors have been poor in recent years. Essentially, they need an influx of new investors to ensure that the older ones are getting good returns. This is a relatively cynical reason for looking for new business, and has left a great many people wondering if these newer investors who get caught up in the advertising hype, will get the same level of service that others do.

So the question is; should you be interested in these new adverts that you’re going to see all over the place? Not if you weren’t interested before.

The key is to look at every single investment objectively just as you always have done. If you trade forex, commodities or stocks manually for instance, then placing your faith in a hedge fund is unlikely to be a wise idea. It’s generally an investment for those who have a large capital, and who don’t want a great deal of control over it.

The bottom line is that you might be about to be bombarded with hedge fund adverts, but don’t get drawn in unless you’re already interested.