Hedge funds is fancy financial partnership between fund manager and investor. Fund manager is known as general partner and investor known as limited partner, both pool their money into fund and employee diverse approaches to make active returns. These funds might be achieved aggressively or make use of leverage and derivatives to produce higher return. Hedge funds strategies include both long and short equity, volatility arbitrage, market neutral and merger arbitrage.
Hedge funds offer worthy benefits over traditional investment funds. Some outstanding benefits include:
- Profit in both conditions, raising and falling of market
- Well-adjusted portfolio decrease volatility and risk
- Managed by the top investment managers
- Several investment plans and strategies to choose from
Of course hedge funds are not risk free at all, there are also some disadvantages attached with it, have a look at them:
- Less liquid than standard mutual funds
- Loss can be possibly large
- Use of leverage can extend losses
- Funds locks up for extended period of time