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.
