Managers often use advanced strategies, including leverage, short positions, and derivatives such as options, and they can invest across a wide variety of markets, including stocks, bonds, commodities, real estate, cryptocurrency, and more. Restricting themselves to accredited investors allows hedge funds to take more aggressive approaches to investing since they're not heavily regulated by the SEC like mutual funds. The hedge fund pools money from its limited partners and invests it on their behalf. The investors are limited partners while the hedge fund company is a general partner. Hedge funds are structured as limited partnerships. The SEC allows accredited investors to invest in less-regulated securities offerings because it assumes investors with that much wealth will have a level of financial sophistication. An accredited investor is defined as someone with a liquid net worth greater than $1 million or an annual net income greater than $200,000 (or $300,000 with a spouse).

According to Eurekahedge India Hedge Fund Index, which tracks hedge funds in India, the category generated 5.07 per cent return in 2015 compared to 38.84 per cent logged in 2014.Hedge funds limit their participants to accredited investors. The minimum ticket size for investors putting money in these hedge funds is Rs 1 crore. There are others such as Singlar India Opportunities Trust, Motilal Oswal’s offshore hedge fund and India Zen Fund.

Some examples of hedge funds include names like Munoth Hedge Fund, Forefront Alternative Investment Trust, Quant First Alternative Investment Trust and IIFL Opportunities Fund. Merger arbitrage funds and distressed asset funds fall into this category.Īs of June 30, 2014, there were 158 alternative investment funds (pooled-in investment vehicles for private equity, real estate, and hedge funds). Here, the goal of the fund manager is to minimise market risks by investing in long/short equity funds, convertible bonds, arbitrage funds, and fixed income products.Īnother type includes event-driven funds that invest in stocks to take advantage of price movements generated by corporate events. Then there are funds that work on market-neutral strategies. One such strategy is global macros, where the fund takes long and short positions in large financial markets based on the views influenced by economic trends. There are many strategies a hedge fund may use to generate returns. They are not required to be registered with the securities markets regulator and are not subject to the reporting requirements, including periodic disclosure of NAVs. These funds work either as private investment partnerships or offshore investment corporations. As the name suggests, the fund tries to hedge risks to investor’s capital against market volatility by employing alternative investment approaches.ĭescription: Hedge fund investors typically include high net worth individuals (HNIs) and families, endowments and pension funds, insurance companies, and banks. Put simply, a hedge fund is a pool of money that takes both short and long positions, buys and sells equities, initiates arbitrage, and trades bonds, currencies, convertible securities, commodities and derivative products to generate returns at reduced risk. Definition: Hedge fund is a private investment partnership and funds pool that uses varied and complex proprietary strategies and invests or trades in complex products, including listed and unlisted derivatives.

Hedge funds meaning