Do-It-Yourself Hedge Funds

How does a hedge fund that outperforms most but only charges 0.36% a year strike you? As you'll read here, the only catch is the $20 million minimum:

The program, FundCreator , designed by Professor Harry Kat of the Cass Business School at the City of London University with PhD student Helder Palaro, lets investors design futures trading strategies similar to hedge funds called synthetic funds that use 78 futures contracts to imitate various risk-return profiles, the reports said.

Hedge funds typically charge a 2% fee per year, in addition to 20% of profits, and funds of hedge funds add a 1% of assets fee and 10% of profits fee, Financial Times said.

The simulator charges 0.36% a year and a $5,250 set-up charge, the reports said.

The minimum investment is about $20 million, Hedge World reported, due to the large size of most of the contracts. About 10 investors are testing the system.

Professor Kat says that his system outperformed 82% of funds of hedge funds.