Sunday, 25 January 2015
Last updated 2 days ago
Mar 31 2008 | 11:38am ET
The hedge fund industry continues to attract investors and managers at a rapid clip, even as high-profile blowups in credit-related hedge funds such as Bear Stearns and Sailfish Capital Partners dominate the headlines.
But while managers and investors must now jump a high hurdle to play the hedge fund game—both in the cost of setting up shop and the minimum net worth needed to become an accredited investor— Deutsche Bank is looking to change all that.
The German bank is now allowing money managers to trade foreign exchange on its platform, dbFX, where, for as little as $5,000, investors can tap foreign currencies directly or with a manager via managed account structures.
“With dbFX, clients can have a managed account structure, which enables people to have their funds managed by someone else, while depositing funds with dbFX.com and not directly with the hedge fund” said Waters. “The nice thing about this product is that it’s a fully transparent structure to the investor who has the ability to make deposits and withdrawals. They can also see their positions in real time.”
The bank’s dbFX customers range from active retail traders and high net-worth individuals to money managers and smaller hedge funds—basically, anyone who wants to actively trade but is not yet large enough for the bank’s institutional business to take on, according to Waters.
For managers looking to break into the hedge fund business, dbFX can be a welcoming option, said Waters, who added that the bank does not endorse specific managers.
Investors who want to take a more proactive approach to trading can opt to start trading on their own under the dbFX moniker. Waters said dbFX’s business is slightly different from many of the retail brokers out there in that it has a higher entrance criteria and services larger contract sizes.
“For example, some of these companies allow their clients to invest with as little as $350 and trade $1,000 contracts. We’re not in that part of the business. Our standard contract is $100,000 and our clients are sophisticated investors with enough net worth to take on high-risk investments,” she said.
However, unlike some other trading structures that attract hedge fund managers, the dbFX platform is only for currency trading, not options or derivatives.
So why should investors want to invest in the FX market anyway? Waters offers that in addition to helping investors to diversify their portfolio, FX allows investors to be profitable whether currencies go up or down.
“With FX, it’s all about shorting because when you buy one currency, you’re selling another one. You can have an opinion about currency movements regardless of what your opinion is of the stock market, based on what’s happening around the world, and make a currency trade on it,” she said.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…