Your Backdoor into Exclusive Hedge Funds

By Wayne Mulligan, on Thursday, November 20, 2014

Pop Quiz:  What’s the typical minimum investment to get into a hedge fund?

A)   $10,000

B)   $100,000

C)   $500,000+

Traditionally, the answer would have been (C) $500,000 or more…

But the rules just changed…

A new company is attempting to tear down the exclusive walls of the hedge fund industry.

And it’s using crowdfunding to do it.

Today, we’ll tell you about this new company...

And we’ll show you how it can give you access to some of the world’s most exclusive investments… without you ponying up $500,000.

How Hedge Funds Work

In case you’re unfamiliar with hedge funds, here’s a quick summary of what they are, and why they’re such a coveted investment:

In some ways, hedge funds are like mutual funds.

In both cases, a group of investors pools their money together, and a fund manager actively manages it.

But hedge funds differ from mutual funds in three important ways:

1.  Hedge funds are private.  In other words, they’re not traded on an exchange, and you can’t call your broker to invest in one.

2.  Hedge funds can be flexible with their capital.  For example, while most mutual funds can’t keep their funds in cash and rarely short the market, when market conditions call for it, hedge funds can do both.

3.  And finally, unlike mutual fund managers, hedge fund managers’ interests are completely aligned with their investors’ interests.  Let me explain...

A hedge fund manager is typically paid using a system known as “2 and 20.”

The “2” stands for the 2% annual management fee they charge.

This covers basic costs like staffing and rent.

And the “20” stands for their 20% performance fee:

Basically, for every dollar in profits they create, they’re entitled to 20 cents of it.

This compensation system aligns the manager with his investors:

He doesn’t profit unless you do.

This system also explains why some of the best money managers seek to become hedge fund managers – they can make fortunes – and it explains why wealthy investors flock to hedge funds.

Unfortunately, because these funds are private and command high investment minimums, historically, they’ve been off-limits to regular investors.

Until now...

A “Slice” of the Good Life

A new company called Sliced Investing is aiming to democratize the world of hedge funds.

Here’s how it works...

Sliced allows individuals to own a “slice” of a hedge fund.

Rather than $500,000 or more, their minimum is as little as $20,000.

Basically, Sliced brings together a number of small investments, and pools them together so the sum is large enough to meet the hedge fund minimum.

Essentially, this is “crowd funding” for hedge funds – which is why we’re so intrigued with the company.

Progress to Date

Sliced launched last summer and has already made significant progress.

More than 500 investors are already on the platform...

In the last 4 months, Sliced has allocated more than $750,000 in investor assets to hedge funds...

And a few days ago, Sliced announced a $2 million round of financing.

Their financing was led by top venture investors Khosla Ventures and Three Point Capital, whose founding teams were early executives and backers of companies like PayPal and Lending Club.

And if you like the idea behind Sliced, you can invest in it right alongside them...

You can do it right now on AngelList »

The Bigger Picture

For now, only accredited investors can invest in Sliced and put money into hedge funds using their platform.

But once the final portion of the JOBS Act passes, Sliced will likely open its doors to all investors.

Remember, The JOBS Act is the set of laws that will finally make it possible for anyone to invest in private investments…regardless of income or net worth.

And that gets us excited.

As investing becomes more and more democratized, individual investors will be granted more opportunities to earn superior returns.

And Crowdability will continue to bring you those opportunities as they arise.

Please note, as always, Crowdability has no financial relationship with Sliced Investing or AngelList. We’re here to be your trusted, independent provider of information and research on the private equity markets.

Happy investing.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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Tags: Crowdfunding Title III Sliced Investing

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