For the small guy (unsophisticated investor, mum and pop), I don’t suggest they invest in hedge funds. When investing in a hedge fund, the most important obvious thing to worry about is “how good is the guy who’s runing this fund really at investing?” The small investor (I shouldn’t say small, I should say unsophisticated investor) doesn’t have a clue, since first of all most small investors are doomed to a life of mediocrity.
There are thousands of small fry hedge funds out there, and only a few will make spectacular returns (and hopefully make it into the big leagues). The unsophisticated investor has nota chance at picking out the next George Soros or Julian Robertson.
Now, there are a lot of well established great hedge funds like Soros Management. This is a list of the biggest and largest hedge funds in 2011. George Soros has consistently outbeaten the markets by a mile. But these big hedge funds wouldn’t bother investing money for the small guy who only has $100,000.
So unless you’re actually a pro investor, don’t bother investing in hedge funds.