FINANCIAL WIZARDS come and go, but George Soros surely has the Midas touch. In 1992 he bet against the pound and won, pocketing one billion dollars. Humiliated, sterling plummeted against the German mark and Mr Soros' reputation was complete.

Mr Soros himself is still principal investment adviser to his Quantum Group of Funds, which has performed spectacularly over the last 28 years, with an average annual return of 33.22 per cent.

Until now, doors to the funds have been all but closed, with UK retail investors having little opportunity to buy into them. You would need to have millions to invest directly in any of them.

But there is an indirect way in. The Fraternity Fund, an offshore fund run from the British Virgin Islands which invests in the Quantum Group, has a minimum investment of "just'' $25,000. Fraternity Fund management is now busy marketing the fund to independent financial advisers in the UK, who may in turn sell units in the funds to their retail clients.

"I feel that the smaller so-called sophisticated investor should be allowed to participate in the broad-based group of Soros funds," says John Anthony, of the Fraternity Fund.

The Fraternity Fund officially began in its present form in 1994, he says. "It is a hedge fund, not a simple fund. Most people believe it has more risk - I have my own opinions," he says.

The fund, which has a net asset value of around $8.3m, only invests in funds which are directly or indirectly advised by Mr Soros himself or by Soros Fund Management.

Apart from the flagship Quantum Fund, other funds included in the Fraternity Fund are Quasar International, Quantum Realty, Quantum Industrial, Quantum Emerging, Asian Development, Quota and Quantum Dolphin.

Returns have been remarkable. An initial investment of $100,000 in the Fraternity Fund in 1990 would have grown to $1,153,003 today, Fraternity says.

But the Fraternity Fund is only suitable for the truly well-heeled who can afford to lose a substantial amount of their investment. It is an unregulated collective investment scheme for the purposes of the Financial Services Act and offers no investor protection.

Also, hedge funds do not operate on the same principles as standard market funds. Instead of broadly mirroring the market as a whole, they aim to achieve a good return whatever the market does.

For example, if banks appeared likely to report better than expected profits while higher interest rates were hitting property shares, the fund might buy banks and sell any property shares it had to make a quick gain. "Many hedge funds will try to isolate situations where they can take advantage of arbitrage oppor-tunities," says Mike Newman of Best Investment Brokers.

"For larger investors there's definitely a case for having, where appropriate, some hedge fund exposure," he says, adding those lucky enough to have portfolios of pounds 500,000 or more could have between 5 and 15 per cent of assets in hedge funds.

"Because they are unregulated with no investor protection, these funds rarely qualify for distributor status... so any gain will be treated as income," says Mr Newman. This means you cannot set the gain off against your capital gains tax allowance.

The fees on any investment in the fund are relatively high. The initial chargeis 5 per cent, and the annual charge is up to 2 per cent. If you withdraw your money in the first three years, you pay a charge of 3 per cent.

Rachel Fixsen