Hedge Funds – Do They Really Have an Investment Edge?

Hedge funds are aggressive investment strategies and tactics that aim for a higher return while keeping the risks fairly low. They have many styles and variants that may seem complex but are actually a simple direct investment tool.

Hedge Categories

In the Event driven funds, fund managers take advantage of a merger or an acquisition to boost returns and profits. Another hedge category called Market Neutral funds involves dividing assets among complimentary investments to reduce the investors exposure caused by market risk. Multinational funds invest stocks and bonds outside their country by assessing the market trends. Niche funds invest in future options which can benefit from changes in interest rates, currency exchange and price of commodities. Convertible Arbitrage buys convertible securities and short sells stock of the same company. Some fund managers opt for the Traditional hedge fund strategy that involves only buying stocks for a longer time period. Hedge funds in India sometimes spread assets among various fund managers to apply different ways of increasing the returns.

Hedge Factors

Now that you know the styles of hedge fund investing,you should be aware of the different terms that are associated with hedge funds. Individual risks refer to bankruptcy, changes in technology and competition. When an entire category of assets is prone to gain or loss in value it is known as market risk. It’s not always possible to ascertain a hedge fund value. The investment fee and performance fee in hedge funds is higher than other investment strategies. Many hedge funds often lock up your initial investment for the first year. Hedge funds are complex investments with very limited liquidity.

Hedge Trends

Performance results of hedge funds in India have shown a healthy growth and have created a launch pad for the industry. Pension funds are now allowing investments in hedge funds keeping in mind their advantages. This involves implementing a more structured, transparent strategy to keep track of performance results on a daily basis. On the other hand, regulation and governance will restrict the hedge fund industry and affect established and emerging players. Hiring managers who will be able to interpret market trends and also stay in front of regulatory challenges is fast becoming a popular trend. Compensation packages are aimed at retaining and aligning with the interests of the investment community.

As you can see the hedge fund is very different in its strategy and may be a bit more complicated but it continues to thrive as investors are always looking for greater returns.

What are the Main Characteristics of Hedge Fund?

The use of hedge funds in personal financial collections has dramatically increased since the beginning of the 21^st century. Basically, the hedge fund is a fancy name for an investment partnership. It’s related to a professional fund manager and the investors, who pool their money together into the fund. In hedge fund in India, the investors contribute funding for the assets and the professional fund manager manages it according to the fund’s strategy.

The Purpose

The purpose of the hedge fund in India is to maximize investor returns and remove risks. If the structure and objective of the fund sound similar to the mutual fund, you may call it that, but that is where the connection between the two ends. Generally, these funds are considered riskier, more aggressive and exclusive than the mutual funds. They are expected to make money irrespective of the market trends. A hedge fund management team resembles traders more than the classic investors. In fact, some mutual funds utilize these types of techniques more than others.

Key Characteristics of Hedge Fund

• It is only open to accredited investors. The investors in the hedge funds have to meet up with specific net worth requirements, which may generally exceed $1 million.

• The investment universe of a hedge fund is only limited by its consent. It can basically invest in anything from real estate, land, currencies, derivatives or some other alternative assets. In contrast, mutual funds usually have to stick to bonds.

• These funds will often use borrowed money to intensify the returns that can potentially expose them to a wider range of investment risks.

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