Hedge Fund Risks

What this video covers

• Why hedge funds provide far less disclosure than registered investment companies (mutual funds), with no daily net asset value (NAV) requirement
• What key person risk means, why it is sometimes called key man risk in older materials, and how manager departure can devastate returns
• How leverage amplifies both gains and losses, creates systemic risk, and can force asset sales at unfavorable prices during margin calls
• Why lock-up periods, limited redemption windows, and gates create liquidity risk that traps investors during market crises
• What valuation risk is, how illiquid assets like distressed debt and private companies get priced, and why manager discretion creates conflicts of interest
• Why "hedge" does not mean safe: the lack of Securities and Exchange Commission (SEC) oversight, exemption from the Investment Company Act, and unlimited leverage or concentration
• The exam comparison table: SEC registration, liquidity, leverage, tax treatment, and fee structure differences among DPPs, REITs, and hedge funds