Prestige and good marketing. Funds market themselves as institutional with a nice address and prospectus which instills trust. Most people are their own worst enemy and deserve what they get. Sad but true.
That's a general problem. There are several multi-manager platforms out there that, to my knowledge, never had a losing month in 20 years. Pretty much all are closed to the outside investors. At best, you can have only one out of two, good returns or good capacity. So, because of that, funds that are any good are almost always closed to the outside money (or have ridiculous fees) and funds that are actively raising funds are a dubious vehicle at best. It's not that different from any other variable commodity, from girls in high school to real estate.
As the name suggests, hedge funds are to hedge your other holdings - not usually hedge themselves-although they can- they should be used as a non correlated hedge for your other assets-- Not as a stand alone only investment ideally. Diversification across hedge fund strategies is key if they are not used to hedge particular asset classes. This is why FOF's can make sense, along with custom designed portfolios of funds. So, yes of course they may lose money when your other holdings are gaining. That's part of the purpose and of course, the chance for outsized gains.
Last time I heard was 0x0! Very generous offer! Perhaps should consider starting a 50%/50% venture with investors who contribute funds while traders contribute trading skills! Trader then would share 50% profits generated.
Different regulations and registrations for CTA and HF. In a CTA the customers funds are segregated in different sub-accounts. In a HF the funds are co-mingled into one pool. You still need a LLC ("registered company") to operate a CTA business. Still need lawyer and accountant (for the LLC). CTA is good structure for a one-man operation. I have seen listed CTA's as small as $20,000 in AUM.
My perception according to the books I read is both CTA and CPO are different structures of hedge funds. Some CTA funds can be quite large in size. For CTAs, the investors would have to take their own risks for uncontrollable losing positions that could cause unlimited loss? How about one-man CPO?
I think that investing in hedge funds solely for hedging purpose would be very well stated. Speculating-type (hedge) funds perhaps should be properly called something else. May be simply called 'Speculating Funds'! D: