Hedge funds Market happens to be the focus of immense interest over the past years, both from regulators as well as investors. Hedge fund usually refers to a private investment fund, occasionally characterized by unconventional strategies and lightly regulated.
There is a high risk of either profit or loss, when investing in the financial market and hence there is no protection against the risk of loss to the capital. This risk of loss is minimized to some extent when investing in hedge funds market. Many hedge funds have the strategies, to generate good positive returns during the volatile market situations. In a balance portfolio, hedge fund reduces the risk and increases the returns. Various research studies have shown that hedge funds have more returns than the traditional funds. These funds are generally professed as small and cautious investment funds.
In 1949, Mr. Alfred Winslow Jones started the first hedge fund. He bought stocks with half his investors’ money, and the other half he used for short selling. By buying a few stock, while short selling others, Jones was indeed hedging his bets and hence the name Hedge funds. In Hedge fund market, the talent and luck of the fund manager is the only determining feature in how much money could be made, irrespective of the condition of the market.
Hedge funds market has a vast variety of fund investment modes, of which, many are uncorrelated with each funds and all of them provides, a wide range of hedge fund strategies to meet the investors’ objectives. Investments in hedge funds market is an ideal long term investment solution, thereby reducing the need to properly time entry and exit from the markets. Moreover, hedge fund investment portfolio provides diversification of funds which is not available in traditional investing.
In Hedge Funds Market, the funds are generally not operated domestically by their employees. They are only investment means which are owned by investors and sponsors; and depends on outside service providers to carry out the fund’s daily business. So, hedge funds create relationships with all the required industry service providers. Recent global financial meltdown has driven away many small to mid tier hedge funds from the market; however, once the financial markets have started picking up slowly, hedge funds market start-ups are able to attract large institutional investors to invest more money into hedge funds. Since there is no regulatory body for hedge funds, it will be difficult to answer how big hedge funds market is. However, it is estimated that there are 6000 to 7000 funds that manage roughly around $600 to 700 billion in assets.
Both hedge funds market and private equity funds markets are lightly regulated, while mutual funds are highly regulated by the respective Securities and Exchange board. Hedge fund managers can invest in any type of Assets in the market and able to use a number of investment strategies.