Know the difference between an incentive fee and a management fee for your hedge fund manager. A management fee is a percentage of the assets under the management of your hedge fund manager while an incentive fee is a percentage of the profit that is gained from the hedge fund investing.
Hedge fund investing is not all done the same way. But one of the most common ways of hedge fund investing is called risk arbitrage, which acquires assets in a company that is the midst of a merger or acquisition. Sometimes a hedge fund manager will buy stocks, while at the same time “hedging” his investment by short selling the stock investment as well.
Hedge funds are not a place where you are able to invest in companies that you agree with business practices.
When investing in the hedge fund market do not worry about the index or how the market is doing. If your hedge fund manager is competent in what they are supposed to be doing then no matter whether the index went up 100 points or down 100 points, you should make money.