When it comes to what hedge fund means, it can be quite difficult to explain exactly what it is. Certainly, in many cases you will find that no hedging techniques have been used. Instead, what you will find is that the various different hedge funds now available will use a variety of different strategies in order to make a profit for those who invest in them.
Most hedge funds today have been set up as a partnership and will consist of only a couple or a number of partners in it. As with all partnerships, there is a general partner and it is this person who manages the funds portfolio for the rest of the partners who have elected to invest in it. The fund manager almost always has his own money invested as well, giving him further incentive to ensure the fund provides good returns. It is the role of the general partner to make decisions with regards to what kinds of hedge fund investing is carried out.
As the manager of the hedge fund portfolio, the general partner aims to produce targeted returns or absolute performance from the investments they make, no matter how the rest of the financial market is doing. As mentioned previously these people will employ several different techniques or strategies to help them achieve their goals. Whereas some prefer to use equity, fixed-income or CTA portfolio strategies, there are some hedge fund managers who prefer to use mathematical algorithms in order to make the right sorts of returns for their investors.
Just like any other kinds of investments, those who manage a hedge fund are subject to the same financial rules and regulations, as are other traders. However, when it comes to the strategies that they employ you will find that these kinds are not so easily accessible to others who manage regulated investments such as mutual funds, so there is a higher amount of risk to the investment a person makes, although the rewards are also greater.
Also in order for the manager of a hedge fund to see any kind of absolute return on the investments that they make, they need to be flexible in the investments that they carry out. This is one of the main reasons why they will look at using different techniques in order to ensure that these returns are made. Below are just a couple of the kinds of techniques that a hedge fund manager will employ.
1. Short Selling - This is where the hedge fund manager will sell a security, which they do not own in order to purchase it a later date for a price that is less than what they sold it at. This, if done correctly, will help them to make a good profit on the initial investment.
2. Arbitrage - This type of investment technique allows the hedge fund manager to buy and sell a financial instrument in a number of different markets at the same time. This then allows them to make a profit from the difference that has arisen between the buying and selling prices.
As well as the two hedge fund techniques mentioned above that can be utilized in this kind of investment there are also hedging and leveraging as well. With hedging, the manager of the fund will buy or sell a security so that they can use the funds to help offset against any potential loss the investment may otherwise have made. As for leveraging, this is used when the manager has to borrow money in order for them to invest in a particular financial product.
Most hedge funds today have been set up as a partnership and will consist of only a couple or a number of partners in it. As with all partnerships, there is a general partner and it is this person who manages the funds portfolio for the rest of the partners who have elected to invest in it. The fund manager almost always has his own money invested as well, giving him further incentive to ensure the fund provides good returns. It is the role of the general partner to make decisions with regards to what kinds of hedge fund investing is carried out.
As the manager of the hedge fund portfolio, the general partner aims to produce targeted returns or absolute performance from the investments they make, no matter how the rest of the financial market is doing. As mentioned previously these people will employ several different techniques or strategies to help them achieve their goals. Whereas some prefer to use equity, fixed-income or CTA portfolio strategies, there are some hedge fund managers who prefer to use mathematical algorithms in order to make the right sorts of returns for their investors.
Just like any other kinds of investments, those who manage a hedge fund are subject to the same financial rules and regulations, as are other traders. However, when it comes to the strategies that they employ you will find that these kinds are not so easily accessible to others who manage regulated investments such as mutual funds, so there is a higher amount of risk to the investment a person makes, although the rewards are also greater.
Also in order for the manager of a hedge fund to see any kind of absolute return on the investments that they make, they need to be flexible in the investments that they carry out. This is one of the main reasons why they will look at using different techniques in order to ensure that these returns are made. Below are just a couple of the kinds of techniques that a hedge fund manager will employ.
1. Short Selling - This is where the hedge fund manager will sell a security, which they do not own in order to purchase it a later date for a price that is less than what they sold it at. This, if done correctly, will help them to make a good profit on the initial investment.
2. Arbitrage - This type of investment technique allows the hedge fund manager to buy and sell a financial instrument in a number of different markets at the same time. This then allows them to make a profit from the difference that has arisen between the buying and selling prices.
As well as the two hedge fund techniques mentioned above that can be utilized in this kind of investment there are also hedging and leveraging as well. With hedging, the manager of the fund will buy or sell a security so that they can use the funds to help offset against any potential loss the investment may otherwise have made. As for leveraging, this is used when the manager has to borrow money in order for them to invest in a particular financial product.
About the Author:
For more insights and additional information and special offers about Hedge Fund Investments please visit our web site at http://www.hedge-fund-advice.com
No comments:
Post a Comment