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Ultimately unscathed and relatively unregulated in the post-crisis world of financial markets, the hedge fund space remains enormous in scope, risky in appetite and exclusive by design.
Another thing that hasn't changed is exorbitant fees—usually 2 percent for management and 20 percent of the fund's profits.
No wonder then that retail investors are starting to ask—why should I spend that much when I could do it myself?
Given the explosion of ETFs and other financial products in recent years, it's possible to create something of a poor man's hedge fund, which will allow you to diversify your allocation both in terms of strategy and asset classes in order to take advantage of the alternative investment space.
Steve Quirk, Senior VP of trading at TD Ameritrade , says investors are primed to begin creating their own low-cost hedge funds as they become more comfortable using derivatives in their portfolios.
“Before it was considered institutional—but now it’s headed for the mainstream. The only thing stopping people from investing in [derivatives] is a lack of understanding, says Quirk, who should know since derivatives now account for 30-percent of his firm's trading volume.
Size, however, still matters, and your relative size as a small—retail—investor means that there are things you can replicate and others that you can’t.
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