A hedge fund is an investment fund that pools capital from sophisticated investors such as institutions and individuals with significant assets who invest in securities or other types of investments by using a range of investment techniques with the goal of getting positive returns. To know about current market of hedge funds, visit the website businessinsider.com. Below are the basic concepts to know before dealing in hedge funds.
- Relative value arbitrage: This hedge fund strategy seeks to exploit observable price differences between closely-related investments by purchasing the security that has higher value and selling the security that has low value. When this strategy is diligently used, it produces consistent return with low risk.
- Quantitative hedge fund strategy: This strategy relies on using technology-based algorithmic modeling to achieve desired investment objectives. They use sophisticated computer models to identify investment opportunities. Quantitative hedge fund strategies are called black box. Funds that rely on this strategy use extensive precautions. .
- Global macro: It involves making investment based on the political and economic outlook of different countries. It involves analyzing the country’s economy if it will rise or fall and knowing the current economic condition of the country.
Benefits of hedge funds for the investor
- Hedge funds create opportunity to invest in multiple marketing securities. One can invest in any market area where they think they can outperform. The ability to trade in different securities simultaneously maximizes opportunities for return by reducing the risk factor.
- Activist hedge fund investor increases shares value by working with company and advising them on decision reacted to merger, demerger, acquisition etc.
- A vital hedge fund industry helps in maintaining competitive edge in the market by attracting financial capital. By trading on the basis of extensive investment making strategy, hedge funds provide the market with price information.