Mutual fund companies with high-net-worth clients will soon find new competition from an online hedge fund company that hopes to remove the mystique surrounding hedge fund investing.
HedgeFund.net of Locust Valley, N.Y. currently posts hedge fund information and performance data on 1,100 funds. The firm plans to go beyond that to enable investors to buy and sell interests in hedge funds online via an electronic trading system it will launch on its website in the first quarter of 2000.
HedgeFund.net will compete with mutual funds for the "super sophisticated, high-net-worth" investor, said Alex Shogren, the founder and chief executive officer of Tuna Group, LLC, the holding company of HedgeFund.net.
Shogren is serious about high-net-worth. The minimum investment HedgeFund.net will require is $5 million. The typical minimum investment requirement in hedge funds is $1 million, Shogren said.
There will be no transaction fees for investments of at least the minimum amount, Shogren said. HedgeFund.net also plans to keep annual management fees at a minimum - between 25 basis points and 100 basis points, depending on the amount of money invested, he said. HedgeFund.net will receive most of its compensation in fees from the funds' custodian, Shogren said. HedgeFund.net has not yet selected a custodian but is in talks with "very large banking institutions," he said.
In the first half of the year, HedgeFund.net will only offer hedge funds domiciled offshore, but by year-end, the system will include U.S.-domiciled funds, Shogren said. The funds will cover a wide array of investment styles, from aggressive growth and investing in distressed companies to fixed-income arbitrage, Shogren said.
HedgeFund.net currently has 6,000 hedge fund investors. Shogren plans to build that clientele by promoting its forthcoming hedge fund trading system through print ads in major financial magazines and a public relations campaign, he said.