Investors across the world try their best to find ways to grow their money with minimal risk involvement. Several of them opt to invest in hedge funds, as it allows the investors to increase their money in a short period of time, without having to deal with high risks. Scott Tominaga points out that hedge funds are typically used for various proprietary strategies trading complex products, and there can be the involvement of both listed and unlisted derivatives in it. He additionally mentions that any smart and savvy investor would have the competency to perfectly identify the hedge fund strategy that can aid them to progress towards their financial goal.
There are several hedge funds available that help the investors to enjoy high investment gains by timely leveraging opportunities cropping up in the market. Scott Tominaga says that in the majority of the cases, hedge funds are not required to be registered with distinguished securities market regulators. Hence, they are not subjected to the various reporting requirements of businesses that are needed for other investment avenues. For example, periodic disclosure of NAVs is compulsory for mutual funds.
According to Scott Tominaga majority of popular hedge fund strategies are non-conventional and aggressive in nature. They typically are focused on yielding the maximum revenue for the relevant investor, within a limited time frame. The risk involvement in a hedge fund depends on the unique nature of the plan. The hedge fund strategy chosen by an investor shall largely be dependent on their specific investment philosophy and overall financial goals. Here are some common hedge fund strategies followed by people today:
- Long/Short Equity: This is arguably the most popular hedging strategy. The long/short portfolio option allows diverse investors to effectively buy stocks belonging to various business organizations that may underperform in the market. These portfolios have quite low correlations to the typical financial market, and are chosen by investors who aim at enjoying absolute returns, regardless of the overall market performance and conditions.
- Market Neutral: These funds are similar to the long/short equity portfolio in their approach, and are majorly renowned for being absolutely independent of the market performance and condition. Market Neutral funds are considerably focused on absolutely eradicating, or at least reducing the overall risk involvement pertaining to market volatility. These funds help investors to enhance their return margins, while also giving optimal assurance of various derivatives with the purpose of hedging their portfolios.
- Convertible Arbitrage: The process of purchasing convertibles for the aim of shorting the underlining stocks is referred to as convertible arbitrage. This is a hedge fund strategy that has quite a low risk involvement, while managing to provide high gains from an investment. Convertible debt can be converted into stocks with ease.
In addition to the options mentioned above, there are a number of other popular hedge fund strategies available today.