Characteristics of Hedge Funds:

• A hedge fund generally uses several kinds of financial instruments to reduce risk and add more returns. It tries to reduce the correlation with equity and fixed income markets. Many hedge funds use short selling, leverage, derivatives such as puts, calls, options, futures, etc. to accomplish their goals.

   

   

• The nature of hedge funds differs a lot in terms of investment returns, instability and risk symptoms. Normally, hedge fund strategies intend to hedge against Markey fluctuations. However, this does not mean that all hedge funds can give great advantage in unfavorable market conditions.

   

   

• The hedge fund manager’s compensation is linked to his overall performance. This stimulates the fund managers to deliver their best. At times, hedge fund managers may invest their own money in the funds that they manage.

   

   

• Most of the investors in hedge funds such as pension funds, endowments, insurance companies, private banks, and high net worth individuals invest in hedge funds to minimize their overall portfolio risk and enhance returns.

   

   

• Many hedge funds can produce uncorrelated returns i.e. returns that are not dependant on market fluctuations. Such abnormal returns from hedge funds are a great advantage in difficult market conditions.

   

   

• Highly skilled, specialized and experienced fund managers manage hedge funds. They are disciplined and diligent and believe in doing everything within there are of competency and competitive advantage. 

Hedge Fund Strategies:

Hedge funds use different types of strategies that reflect different kinds of risk and return trade-off:

• A macro hedge fund invests its fund assets in both the stock and bond markets. It can also invest in other investment avenues, such as currencies, in anticipation of benefits from the major shifts in some investments, such as global interest rates and nation’s economic policies.

   

   

• An equity hedge fund can invest in international markets or many concentrate on a particular domestic market. This helps the fund to invest, to hedge against the fluctuations in equity markets. This can be possible by selling overvalued stocks or stock indices in one market and buying the undervalued stock or stock indices in another market.

   

   

• A relative hedge fund tries to achieve a high return by exploiting the price difference or spread 

Hedge Fund Risks:

Lack of transparency
Limited liquidity
Difficulty accessing quality hedge funds
Unreliable or incomplete return data
Valuation risk
Asymmetrical nature of Hedge fund returns distributions [SKEW]
Counterparty risk [Leverage]

pls put a detailed mail on this concept plzzz\\

reg

sitaramarao

dsitaramarao @ gmail.com

India's Q2 GDP likely to have grown by about 4.5%: Experts

ICRA, an associate of Moody's Investors Service, said the Index of Industrial Production indicates a mild improvement in manufacturing and mining & quarrying in Q2 from the previous quarter.

https://www.moneycontrol.com/news/economy/indias-q2-gdp-likely-to-have-grown-by-about-45-experts_998293.html

Regards

Ramalingam K, MBA, CFP,

Director and Chief Financial Planner,

Holistic Investment Planners

“Best Performing Financial Advisor Award” Winners from CNBC TV18

www.holisticinvestment.in