NEW YORK (CNN/Money) - While mom-and-pop investors have watched their fortunes slide into a black hole, an elite group of investors - the ultra-rich -- has been doing just fine.

How are they doing it? With hedge funds, which are like speculative mutual funds for the super wealthy that promise a profit in any market. Because the funds aren't regulated like a traditional mutual fund, managers have free rein to use anything from short-selling to ultra-risky currency bets. And that flexibility has paid off during the downturn -- hedge funds are up about 35 percent since January 2000, compared with a loss of 35 percent for the S&P 500. The typical minimum investment is $500,000 and investors often must have a net worth of at least $1 million.

Now, financial services companies are rushing to give the little guy the chance to invest like a millionaire. As the bear market lingers on, here's a sampling of what you can expect to hear pitches for -- but small investors should think long and hard before jumping in.

The Schwab Hedged Equity Fund will invest in about 200 large-cap stocks on the "long" side and 100 names on the "short" side when it debuts Sept. 3. When you buy "long," you're betting the price will rise. When you "short" a stock, you're betting the price will fall. For every $1 the fund has in traditional long positions, it will short 25 cents' worth of stocks.

To make its decisions, the fund will use its new stock-rating system, which grades some 3,000 stocks on an A-to-F scale, according to variables such as price-earnings ratios, earnings estimate revisions, free cash flow growth and stock price volatility. (There are more than a dozen other variables that Schwab is keeping a secret -- for more, click here.)

Robin Jackson, who will manage the fund, said the goal is to come close to matching the market when stocks are rising and outperform the market "substantially" when stocks are falling.

"This fund should be an enhancement to your investments -- it's not for 100 percent of your money," said Jackson, who previously managed hedge fund assets at Bunker Capital Management. "This is the seasoning on a portfolio."

To be fair, short-selling is a more expensive investing strategy, but the fund does come with a hefty price tag. Total estimated expenses are 2.22 percent. Technically, total fees are 3.52 percent, including 1.75 percent for management and about the same amount for costs relating to short-selling and other expenses. Schwab is reducing the expenses in the first year.

Comparable funds that use shorting strategies charge a total of 2.5 percent, including 1.5 percent for management fees and about 1 percent for short-selling and other costs, according to Morningstar. Your garden variety no-load would charge a total of about 1 percent a year, including 0.5 percent for the management fee and the same amount for other operating costs.

"Schwab's rebate does get the cost down to the average for the category, but it's still only an estimate," said Brian Lund, an analyst at Morningstar. "You could end up paying 2.45 percent or even more than 2.5 percent."

And, you must stay invested in the fund for at least six months or pay a 1.5 percent redemption fee. You'll have to fork over $25,000 to get in the door.

"I have great concerns about the expenses with these products," said Gary Schatsky, a certified financial planner in New York. "Most consumers should be very wary."

A Schwab spokesman argued the fund's costs are comparable to its peers. At the same time, it's a more "sophisticated" product than what's currently available to investors, he said.

Toews Nasdaq-100 Hedged Index Fund and Toews S&P 500 Hedged Index Fund, launched a year ago, act like traditional index funds until stock prices start falling. Then, when the Nasdaq and the S&P 500 fall below certain levels, the managers hedge by moving the entire portfolio into U.S. Treasurys.

The two funds have been entirely in cash since March 20, and that has insulated them from the summer rout. Toews' Nasdaq 100 fund is down nearly 5.3 percent year to date as of July 31, while the Nasdaq 100 index is down nearly 39 percent. Toews' S&P 500 fund is off 4.7 percent, while the index is down nearly 20 percent.

The way they calculate when to start hedging is a secret -- it's proprietary software that Toews Corp. developed and uses with its 40 managed portfolios for private clients. The company won't even hint at what variables it uses in its calculation, but its private portfolios have earned 15 percent-to-25 percent a year in each of the past eight years, according to president Phillip Toews. The funds will move back into stocks if the indexes each rise 5 percent.

"Being a long-term investor is not enough," Toews said. "Our funds neutralize market volatility."

Eventually, whenever assets grow to at least $100 million, they will short index futures contracts as a more efficient way to hedge the portfolios. But they have a while to go before they'll do that -- both funds are tiny, with combined assets of $15 million. Total expenses are capped at 1.5 percent, and the minimum to invest is $10,000.

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"When they're 100 percent hedged, they're not really doing anything -- their way of adding value is by market timing," Lund said. "You're not an investor in the stock market, you're invested in their timing system. And they're not funds with long track records -- they're practicing a very tough strategy."

While Schwab and Toews are mutual funds with the word "hedge" in the name, Quadriga Asset Management is seeking SEC approval for a true hedge fund with a $5,000 minimum called Quadriga Superfund Limited Partnership.

The fund will invest in world currencies, stock indexes and gold, as well as commodities such as grains, sugar, and coffee. It carries a performance fee of 25 percent, according to the SEC filing. (Hedge fund investors always pay a performance fee of 20 percent-to-25 percent of what they earn each year.)

The firm uses computer software to identify global trends and then will either go long or short. For example, the fund may decide U.S. stocks are too high and then short the S&P 500. Or, it may go long on the price of gold, betting that world investors will be too fearful to invest in equities.

Quadriga is a Chicago-based broker-dealer that is part of Quadriga Group, an Austrian-based investment firm founded six years ago by two university students in Vienna. The firm manages $300 million in assets worldwide. The company declined comment on the new hedge fund pending an SEC decision.

But Guenter Mathis, chief operating officer, said Quadriga Group has earned 30 percent for its flagship fund, Quadriga AG, in the past six years, and about 49 percent annually since 2000 for the more aggressive Quadriga Global Consolidated Trust. Both use the same investing strategy. (The two funds aren't available to U.S. investors.)

"Institutional investors can use these strategies to protect themselves in down markets," Mathis said. "It's insurance in downside markets and a profit enhancer in upside markets."

Still, when you invest in hedge funds you're banking on the manager. Even the stars of the hedge fund world have had blowups. George Soros of Soros Fund Management, Julian Robertson of Tiger Management and John Meriwether of Long Term Capital Management -- all three have all been forced to reorganize or liquidate their holdings in recent years because of market volatility.

And the shine on hedge funds already is beginning to fade: According to the Hennessey Hedge Fund Index, representing about 500 funds with $270 billion in assets, or half the industry, is down an average of 4.7 percent as of July 31, according to Hennessey Group, a New York consultant. While that's a lot better than the S&P 500 (down about 19.6 percent in the same time), hedge funds are on pace to have their first down year since 1994.