Tuesday, September 24, 2019

Hedge Found Managers Essay Example | Topics and Well Written Essays - 2000 words

Hedge Found Managers - Essay Example This helps in preparation of a balanced portfolio mix. The management of assets portfolio, which is unregistered and private, can be done through the establishment of an investment structure called hedge fund. These funds are asset classes that use different strategies like hedging and leverage involving placing bets on commodities, interest rate and currencies, based on the prevailing macroeconomic conditions. These funds do not follow the market directions. However, there main aim is to generate the profit by aiming at mobilizing steps to attain positive return on the invested fund. Hence, these funds operate with the view of generating absolute returns, instead of relative returns, regardless of the rise or fall in the stock market indices or directions taken by the financial markets, during a particular period. Accordingly, hedge fund managers need working diligently in this direction. They expect and get the monetary compensation for meeting theset targets. This compensation comprises of the high fee structure that involves profit participation by the hedge fund manger. Considering this, a hedge fund manager entertains only the wealthy investors, which may include cash-rich corporations and individuals along with pension funds, who wish to hedge their investments against any negative correlation with the financial markets. For this purpose hedge fund managers label such customers as ‘accredited investors’. The basic strategy adopted by hedge fund managers is to look for high rewards, which also carry the chances of high risks. While doing so, any oversight on the part of hedge fund managers can result in financial catastrophes of large scale. The example of two collapsing â€Å"Bear Sterns† hedge funds during the year 2007 is significant in this direction. These funds are not allowed for individual investors, as they are

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