Hedge Funds vs Robo Advisors

Two of the emerging trends in fund investing are the robo advisors and hedge fund managers. Both stock marketing services benefit beginner investors who choose to invest small amount. The good news is, a new market environment is developing gradually that ends the exchange woes and simplifies the customer’s choice to pick a specific option from the many available.

A good marketing strategy helps you understand your investing goals and define a path to achieve these goals in realistic terms. If your individual goal is to absorb more rewards out of long-term investment, then you must consider some specific criteria with which you can measure returns and boost your portfolio performance.

What is a Hedge Fund?

A hedge fund is simply nothing more than an alternative investment structure developed by authorized investment advisors. The theory behind hedge fund was formulated many years ago when the investors used to hold their stock funds for both long and short term period so that they could make money regardless of whether the market soars or goes down.

Unlike being a specific type of investment, hedge fund is a pool of underlying securities that uses private proprietary strategies for stock investing. The hedge fund managers raise capital from institutional investors or buy an entire business, and then invest the money according to a pre-defined strategy.


What kind of investors can invest in Hedge Funds?

Methodically, most investors are eligible for investment in hedge funding in all probability. However, in practice, it is available only to sophisticated investors with qualifying assets. A sophisticated investor has to meet the following industry standards to become eligible for hedge funds.

  • A business director or executive or a qualified person who is already engaged in hedge fund management or is a recognized hedge fund investor.
  • An individual whose personal annual income lies in the range of $20,000 - $30,000 or above subject to continuation of two years. He/she must assure to maintain the same figures in future.
  • Any institutional entity in which all the equity investors are accredited as sophisticated investors on their own grade.

If you have ever wanted to ask your advisor about hedge fund, never hesitate.  The term hedge fund is a cluster of different types of arrangements in which a private firm or partnership raises money from trusted investor groups and deploys that amount subject to a pre-defined asset class. Most of the hedge funds are tagged as "high water mark", meaning the hedge fund manager will be responsible for compensating all the losses if the stock fund declines.


Robo Advisors taking over Hedge Funds – Shaping the Future of Stock Market

hedge funds vs robo advisors

Transforming the way how institutional investments take place in the stock market, many big companies and veteran consultants are now advising investors to embrace advanced technology stock analysis platforms in order to gain high returns in future. Today, most of financial planners make use of automated online tools to do stock analysis and provide the best possible advice on capital investments. This tool known as robo-advisor serves as assistant to investors for making the right decision and improving their stock portfolios.

Breaking the ground for small startups, big firms and individual investors, robo-advisor has been evolving as new technological disruption that makes it easy for beginners to improve their financial status in the early phase of their career. Business and individual investors can easily get expert advice using robo-advisors and start analyzing their portfolio to know the most accurate rating for the likelihood of success.

What Makes Robo-Advisor a Better Method for Wealth Management?

Both hedge funds and robo-advisors provide an easy way for investors to allocate their stock portfolio tuned to fit into their personal needs. While human hedge fund managers use a set of pre-defined strategies to invest in stocks and obtain risk-adjusted profits, a robo advisor provides online financial advice based on mathematical machine learning algorithms helping investors to make the right decision about maximizing returns on investment. 


It is good to have your money managed by a human pro, but you need to know the background of the hedge fund manager before relying on him for a long-term relationship. The performance statistics for actual return on individual hedge funds are difficult to analyze because they are not required to report their performance to a single database and few restrictions against publishing shares for sale in a company led many hedge fund managers to keep performance information as private.

It is notable that a large number of hedge fund managers do not abide by the all the rules and regulations of the Securities and Exchange Commission, and are often found steering their clients toward more expensive share classes because those share classes paid them more compensation.  In recent years, the stock market commission has brought more than hundred cases against investment advisors who managing hedge funds of different clients, under the major categories listed below. [1]

  • Conflict of Interest
  • Principal Trades
  • Fees and Allocation of Expenses
  • Failure to Register as an Investment Adviser
  • Trade Allocations
  • Best Execution
  • Failure to Disclose Changes in Investment Strategy
  • Valuation of Securities
  • Foreign Corrupt Practices Act Violations

Choosing and using a robo advisor can save you from becoming a victim of fraud. Unlike human advisors, robo advisors are essentially computer algorithms that promise to administer your capital investments better than you. Stripping emotions out of investing decision, robo advisors track your finance based on real-time data in an impartial manner.

Evidences suggest that robo-advisors allow their prospective clients to sign up online and start analyzing their portfolio to make intelligent decisions.  They also provide a better route to your investment allocation.

Get the most accurate results to obtain high returns on investments with a robo advisor. Well-known financial firms like WealthFront, Carson Wealth Management Group, Money CapitalHeight Research Pvt. Ltd, Betterment, and TAnalyzer are only some of the trusted financial firms that have launched their own proprietary algorithm and aim to provide complete advisory services at low fees.