“THE exclusive world of hedge funds is admitting more investors. Now that it is, though, not everyone will want to join the club,” writes Donna Rosato in today’s New York Times.

“Once reserved for people wealthy enough to pony up $1 million or more, many funds billed as less risky and more transparent than traditional hedge funds are being opened to investors, some with minimum investments as low as $50,000.”

” ‘Hedge funds are going retail,’ said Charles Gradante, chairman of the Hennessee Group, an adviser to hedge fund investors. ‘In a few years, you’ll see them listed beside mutual funds in the stock pages.’ “

“Traditional hedge funds, loosely regulated investment partnerships that use complex strategies like short-selling and merger arbitrage, are not required to disclose their holdings or performance. Presumably, they can afford to take more risk.”

“There are nearly 6,000 hedge funds worldwide, up from 880 a decade ago. Investors poured $144 billion into the funds last year, pushing up assets to $563 billion, 38 percent above the total of the previous year, according to a Hennessee Group survey.”

“As more investors turn to hedge funds, so do money managers in pursuit of more lucrative pay. Hedge fund managers often earn at least 20 percent of portfolio gains above a specified minimum, perhaps 8 percent. In contrast, most mutual fund managers do not receive performance fees and charge an average 0.5 percent to 1 percent in annual management fees.”

“To stem the flow of talent — and the loss of business — mutual fund and financial services companies from American Express and Morgan Stanley to UBS PaineWebber and Pioneer are opening their own hedge funds. Mutual funds that mimic some of the characteristics of hedge funds, without most of the restrictions, are also growing in popularity.”