July 28, 2006

Facts About Hedge Funds

Hedge fund market is now estimated at $1.1 trillion. It is growing at a faster pace. Hedge fund includes a variety of investment strategies. Some of the hedge funds use leverage and derivatives while others are more conservative in their approach. They use limited or no leverage. Most of the hedge fund strategies aim at reducing market risk by shorting equities. They are highly specialized and relying on the specific expertise of the manager or management team.

Performance of many hedge fund strategies is not dependant on the direction of the bond or equity markets. However, conventional equity or mutual funds were exposed to market risk. Hedge fund strategies are limited and can successfully employ before returns diminish. Hedge fund managers are always in an advantageous position to limit the amount of capital. Investing in hedge funds tend to be favored by investors that are more sophisticated. They fully understand the consequences of major stock market corrections.

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