Hedge funds pool money from investors for buying securities and other types of investments. While this may sound like exchange-traded funds (ETF) or mutual funds, hedge funds are not limited in the manner mutual funds are. In fact, they often employ aggressive investment strategies like short selling and debt-based investing. Hedge funds may also involve the purchase of assets that other funds cannot invest in, like art, currency and real estate.
Scott Tominaga mentions that people interested in high returns usually invest in hedge funds. Scott has about 17 years of experience in financial tools. His years in the industry have provided him with a good understanding of varied investment options, including hedge funds.
Scott Tominaga briefly talks about making hedge fund investments
Hedge funds are valuable to investors as a strategy as they provide access to return drivers that may not be present elsewhere in their portfolios. The overall level of the stock market is the dominant driver of almost all of conventional equity funds. However, a large number of hedge funds to attempt to minimize or hedge their exposure to the broad stock market. They are also known to take a more aggressive strategy by investing in alternative asset classes. These alternative asset classes can range from private companies and distressed assets to real estate and commodities.
Hedge funds are essentially privately owned and managed financial institutions. They are funded by capital pooled from discerning companies, investors, and other clients. Hedge funds do business with individuals who have a high net worth or business with accredited investors in particular. As per Scott Tominaga, hedge funds may invest in both short and long across a variety of markets. They typically actively hedge or reduce their exposure to risk factors that they consider to be undesirable. These factors allow hedge funds to deliver streams that are quite different from traditional investment options. These return streams might be quite diversifying to traditional investments. As a result, they are pretty valuable to the overall portfolio.
Hedge funds involve distinctive strategies, fees, and returns. Managers generally have the capacity to alter the strategy of the fund or assets without alerting the shareholders. Some of the managers of these funds put a high focus on improving returns, while some provide greater diversification. This diversification may even include exposure to crypto-currencies.
The very first step in approaching hedge fund investments would be to be clear about the reasons for investing. Some investors aim for return enhancement, while for others, risk reduction is a key priority. There are also investors who simply focus on the access to unique markets. Determining the reason for investing will guide the approach to investing. Unlike stocks or exchange-traded funds, hedge funds ideally require investors to leave their money in the fund for a particular period prior to making any redemption. But they can prove to be a highly worthwhile investment in the long run as the assets allow hedge funds to diversify and provide a lack of correlation to the stock market. This results in an improved downside capture profile.