I just happened to be browsing through this list: http://www.bloomberg.com/slideshow/2013-01-04/the-20-top-performing-lar…
and I was just wondering usually what does it take for someone to be able to invest in or alongside one of these hedge funds? Is the exclusivity based on net worth? Or anything else?
Also looking at the hedge fund with the number one spot, it says their strategy is "Mortgage-backed arbitrage" . Could someone explain that to me in layman's terms?
Not too familiar with hedge funds as you can obviously see. Thanks.
You need to be an accredited investor and they usually have a minimum investment. Mortgage backed arbitrage means that they are making an arbitrage play on mortgage backed securities. Arbitrage is making a "sure" profit due to the rule of one price. If a share goes for $51 on one exchange and $49 on another you sell short the expensive and buy the cheaper of the two and that should drive the prices together. There is also start arb which uses algorithms to determine whether things are misprinted.
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