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Hedge Funds

An alternative investment fund, a hedge fund is an investment vehicle used largely by institutional investors and HNIs. Just like mutual funds, hedge funds can also be defined as a pool of underlying securities. Moreover, hedge funds can invest in diverse types of securities just like mutual funds. That said, there are many factors that make hedge funds different from mutual funds.

Hedge funds invest in long and short positions through well-defined long-short strategies.Thus, they use investor corpus to buying stocks.Further, they also sell stocks to buy thembackat a later date when the stock priceswould have ideallydropped. Moreover, many hedge funds invest their corpus in derivatives contracts such as futures and options to either buy a security or sell a security at a specific price.

Leverage is a popular investment technique that many hedge funds use as part of their investment strategy to invest the borrowed corpus forincreasing the returns potential.However,this also leads tohigher risk of incurring losses. The basic objective of hedge funds is to increase gains through investment of borrowed corpus while offsettingthe losses.Thus, they use high-end investment techniques and methods for hedging their investments.

Hedge funds provide investors with a strong alternative to balance the risks associated with traditional investment funds such as stock market sell-offs. Hedge funds work out thepossible risksin the form of capital loss.Thus, they get themselves into an advantageous position where they can manage investment riskseffectively by attempting to limit their investment losses. Hedge funds are an effective way for you to diversify your investment portfolio for deriving more consistent returnsfrom your overall investment.

To know more about HedgeFunds as an investment option in emerging nations such as India, call: 022-28583333or write to us at: www.altsmart.in

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