Hedge funds are primarily concerned with the aim of reducing unpredictability and risk while seeking to maintain capital and provide positive returns in any kind of market situation. For the purpose, the hedge funds can become involved in any type of trading of the undervalued securities, can make use of arbitrage, can buy or sell options or other securities and many more. At the same time, these funds are always ready to invest money in any kind of financial instrument where the risk factor is low and the growth rate is quite high. For the purpose, the hedge funds follow a certain process and this process varies for different funds.
Characteristics of Hedge Funds
The hedge funds are interested in using a number of financial instruments at a time because diversified investment can reduce the risk factor from investment and at the same time, it can increase the amount of profit from the investment.
Different hedge funds follow different methods and so, the amount of return also varies. At the same time, there are several hedge funds that work with the aim of providing steady growth to the investments and consistent return to the investors.
The hedge funds are managed by some of the most experienced professionals of the field of finance. Some of the investors of the hedge funds are the insurance companies, pension funds, private banks, and individuals. All these investors want to keep the capital secured and reduce the risk related to the process of investment. At the same time, good return is also a reason that attracts all these investors towards hedge funds.
Strategies Followed by Hedge Funds
Hedge Funds follow a number of hedging strategies to fulfill their financial purpose. Some of these strategies are selling short, using arbitrage, investment in discounted securities, trading derivatives, trading options and many more.
Facilities of Hedge Fund Investment
The hedge funds have the potential to offer good returns to the investors irrespective of the market condition. At the same time, several research works have proved that the hedge funds are subjected to minimum risks in comparison to other investment options. On the other hand, the investments are made in long term mode and because of this, the time factor related to some other investment modes are not found here. There are different types of hedge funds providing different types of returns and investors get the chance to choose an appropriate one to fulfill their financial objectives.
Last Updated on : 1st July 2013