Forex hedge funds or commodity pools are a little bit different than traditional hedge funds because of the extreme liquidity which is a characteristic of the off-exchange foreign currency markets. Because of the liquidity and ease of getting into and out of positions without moving the markets, the structure is typically more flexible and “investor friendly” then other funds.
Specifically, some of the central structural characteristics of forex funds include:
- generally no lock-up (although some managers may have very short lock-ups of 3 or 6 months);
- generally monthly liquidity with notice as short as a week (HFLB note: while many managers would have the ability to allow more frequent redemptions, we do not recommend this practice unless the manager has a good back office which can efficiently handle redemption requests);
- generally monthly performance reporting and some managers even provide more frequent performance reporting;
- usually management fees of 1% to 2% and performance fees of 20% or some other sort of “tiered” or “graduated” performance fee structure.