When we talk about hedge funds, we know that they will either maximize your returns exponentially while also leaving you exposed to risk, volatility and illiquidity. If you're new to this or have little to no experience, it is highly recommended that you employ financial advisory services to manage your funds.
A little less known fact about hedge funds is
that they aren’t all necessarily registered with the Securities and Exchange
Board of India (SEBI). They don’t have to disclose their NAVs at the end of the
day either. This is the only investment form with an exception to these
regulatory requirements. To start with, your minimum ticket value is 1 Crore
INR.
Keep in mind that the fund manager that you
employ would have complete discretion when it comes to the composition of your
portfolio, deciding the investment strategy and the amount of leverage. Highly
skilled financial advisory services that you seek to employ should be able to
quickly adjust your portfolio based on rapidly changing market conditions.
Speaking of strategy, these are the most
commonly used strategies to invest in hedge funds:
●
Event-driven:
In short, some corporate events lead to price movements in the market. These
situations cause fund managers to take long and short positions in different
types of securities. Merger arbitrage and distressed asset funds are two
examples.
●
Long and Short Selling:
Short-selling refers to the selling of securities without buying them, but with
the intention of buying them at a predetermined date at a predicted price in
order to make gains.
●
Market-driven:
Those that provide such financial advisory services
must stay on top of global market trends to exploit the situation and make
swift decisions based on changes in currencies, interest rates, commodities and
equities.
Understanding the nitty-gritty of hedge funds is
important before you decide to invest in them. See if it aligns with your
goals, and weigh out the entire complex structure before you proceed.
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