The other big thing hitting the markets is look-alike hedge funds, sometimes called ARFs (Absolute Returns Funds). These are similar to what ETFs, Exchange Traded Funds have been to mutual funds. ETFs are a basket of securities that are often designed to mimic mutual funds, but at a much lower broker's fee. Look-alike funds mimic ETF's relationship to mutual funds, by running profiles of the investment strategies of various hedge funds and mimicking them. Then the broker fee is only 1 or 2 percent, and there is no whopping 20 percent profit fee. These look-alike funds are definitely around, and if you ask your broker about them or do a few Google searches, you can get them. Although hedge funds total about $1.5 trillion in invested funds and mutual funds total much more money, about $8 trillion, hedge funds have an increased weight because of their use of leverage. At a ten to one ratios the effective investment power of the hedge funds can be greater than mutual funds.
To tell you the truth, if you read the financial press, it is a bit of a mystery what exactly the frenzied attraction to hedge funds actually is. They are invested in a combination of derivatives, mergers and acquisitions, selling short and some murkier deals in the "deregulated universe". The danger is, as predicted by some soothsayers in 2005, that some funds will over-leverage and take excessive risks and go bust. That is exactly what happened to Amaranth hedge fund that had a $6 billion plus blowout on the oil futures market.
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