August 08, 2006

Hedge Funds Offer Protection against Market Risk

Whenever you make some investments, obviously you look for some sort of protection against market risk, given the volatile nature of your market. Do you really get the protection? This question remains complex for many investors like you. Most mutual funds cannot take short positions or use put options. However, hedge funds can do this and more with the flexibility to become responsive and opportunistic in the investment.

Hedge funds are completely different from the conventional funds. They are not limited to a single asset class such as stocks. Within the hedge funds, there are a wide variety of funds with strategies and styles. Some may invest in asset classes such as currencies or distressed securities. They also utilize return-enhancing tools such as leverage, derivatives, arbitrage and highly concentrated positions that are generally beyond the reach of mutual funds. Hence, they are always in a better position to reduce market risk.

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August 8, 2006 in Strategy | Permalink




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