At this juncture we will return to that notorious chest nut. Hedge funds have created a buzz within the business community over the last few decades. At this point I would not go back to their demerits.
I have explored these in previous articles but I would like to look at their relevance to cross border wealth management. As you all probably know, rich people are always looking for ways of making money. They are also always looking for ways to save costs. The international hedge fund can achieve these two objectives in one stroke.
Imagine that you are a rich merchant in a socialist country. The taxes are prohibitive and the government legislative regime is very unhelpful. Along comes someone who says that they can invest your money for you at a small cost. You then wonder where they are taking your money. They tell you that they are taking it into a tax haven.
What would your response be? I bet that many of you will choose to go to the tax haven. Even the so called moral patriotism can be defeated by the pursuit of profits.
Hedge fund wealth management
This is how the hedge fund has grown as a powerful tool for wealth management. It deals with the transfer of huge amounts of capital across borders. Experts in this form of wealth management then create strategies that are meant to reduce the risks for the investor. Ultimately they intend to increase the profit levels of the investment.
A side benefit is that the investor can avoid the prohibitive taxes within their area of jurisdiction. We all know the power that hedge funds have acquired over local governments. This means that all the demands that would not be possible are made possible by the influence of the hedge fund.
The adage that there is safety in numbers is quite relevant here. The hedge fund will collect a very large number of investors and put them in one place. It will then seek to increase their power by pooling all their resources together.
This means that they share the risks as well as the profits that will inevitably result. If one area of the business is falling then the others can prop it up. This is sophisticated wealth management at its very best.
The poor lone investor cannot compete with such a powerful lobby. In fact they will end up being eaten alive by the hedge fund. Wealth management then becomes a collective pastime. The rich have formed an affluent club that is very effective at looking out for their interests. If I had the resources I would definitely go for the hedge fund as a means of wealth management.
It is ethically dubious but the efficiencies that it brings will remove some of the risks of investing on your own. I would assume that the hedge fund managers have the experience to be able to grow my wealth. The possibility of massive loses always looms but I think that the hedge fund compares very well with other schemes.