Hedge fund is one kind of limited partnership deal that is generally different from mutual funds because of their influence on the use of leverage is relatively low. On other hand, hedge funds provide great extent of flexibility in terms of work policies. Numbers of investors are also comparatively low and are solicited to invest larger initial minimum investment.
A hedge fund is an alternative investment vehicle available only to sophisticated investors, such as institutions and individuals with significant assets. Unlike mutual funds, hedge funds are not bound on some set of laws coded to give protection to the investors. However, there are some prime regulations similar to other investments funds, like fraudulent, mismanagement, etc.
Hedge funds are mostly open-ended, allowing additions or withdrawals from the investors. Most of the hedge fund strategies focus to achieve a positive ROI regardless of how market supply and demand curve goes. These funds are not for the general public or investors, that is why there are many exemptions from those regulations that govern other investments.
There are four main major strategies for Hedge Fund investment:
- Global Macro: It utilizes a global macro investment from considerable shares, bonds, or currency market positions, while anticipating global events in order to produce risk-calculated returns.
- Directional: It utilizes market direction, trends, or instabilities when choosing stocks from various markets. This strategy has greater exposure to determine market fluctuations and fund managers identify the right direction to invest.
- Event-driven: It utilizes the current situations of the underlying event and after evaluation of opportunities and threats associated with certain event, investment is made to generate quick profit.
- Relative value: It utilizes the advantages of relative discrepancies between securities prices. This could be happen because of mispricing of securities, primary securities or the overall market value. Hedge funds managers perform particular mathematical implementations and technical analysis to identify price discrepancies in securities.
Some benefits of Hedge Funds:
- Hedge funds strategies are proven to have the ability generate positive returns.
- Hedge funds balanced the portfolio by reducing risk and instability of ROIs.
- Wide range of choices available for hedge fund strategies.
- Hedge funds diversify the investment portfolio.
- Requires no timing for entering or existing from any market.
Here at Memorendum, we have a community of hedge fund manager, underwriters, and investors willing to serve each other with passion.