The SEC announced that it is finally ready to vote this week on the provision of the JOBS Act allowing hedge funds to advertise. Scheduled to take place July 10, a successful vote would lift the 80-year-old ban on hedge funds’ ability to market to the masses. Wall Street’s forbidden fruit would then, for intents and purposes, be able to be sold at Wal-Mart.
Look out, Ma and Pa Kettle, here come the hedge fund managers! That giant sucking sound being heard in Boston are the billions of dollars leaving the coffers of mutual funds and heading for the hedge fund industry.
It is clearly an exciting time for hedge funds, as the opportunity arises to leverage the tools of Madison Avenue to get their messages to the masses. But, masses beware. Make sure you read the fine print and, even more important, perform the due diligence.
Loyal readers of this blog and my books know that I believe that investors of all shapes and sizes should have access to products that zig when the markets zag, i.e., be able to use funds that can go both long and short in order to protect their portfolios. Markets don’t always rise, so having investments that profit, or at least soften the blow when markets fall, just makes sense.
What is more important, though, is that investors understand what is happening with their money at all times. You need to ask questions and get answers about how your money is being managed and insure that what portfolio managers say they are doing with portfolios is actually what they are doing with the portfolio. It is your money – you need to understand what is happening with it.
Don’t be fooled by advertisements. Do the research both before and after you invest. Understand how the portfolio manager operates and ask lots of questions. It is your responsibility and your right to know what is happening. And remember, as the SEC always says
Past performance is no indication of future returns.