| The primary goal of hedge funds is to obtain | | | | long-term investments in the fund. |
| positive growth for the investors. Hedge funds | | | | - Cross Hedge - this involved linking assets that |
| can accomplish this in a number of ways. Usually, | | | | are directly opposed. In this way, the loss in one |
| different strategies are employed to take | | | | area can be made up with gains in another area. |
| advantage of the broad range of financial | | | | Hedge funds may also invest in options outside |
| instruments available for hedge fund investment. | | | | the stock market. Business ventures, artwork, or |
| By using these strategies in conjunction with | | | | other investment opportunities may be used to |
| various aspects both within and outside of the | | | | provide a potential for growth that has no direct |
| financial sector, successful hedge fund managers | | | | ties to the stock market or foreign exchange |
| bring in a steady, positive return rate, despite | | | | markets. These types of investments require a |
| how the market is performing at any given time. | | | | savvy hedge fund manager in order to ensure |
| In order to understand how hedge funds work, | | | | that the deal has been thoroughly evaluated for |
| you need to understand the main types of | | | | profit potential. If your manager has a particular |
| strategies, the types of investments possible, and | | | | specialization, these types of off the market |
| the numerous ways this type of fund may be | | | | investments may be a standard part of the |
| managed. | | | | hedge fund. |
| Basic Hedge Fund Strategies | | | | When you are first starting out with hedge fund |
| While it would be impossible to supply an | | | | investment, or are looking for a new fund in |
| exhaustive list of the types of strategies a | | | | which to invest, it is important to recognize that |
| manager may employ, there are some broad | | | | no two funds will work in exactly the same way. |
| categories with regards to styles in hedge fund | | | | You must perform all due diligence to make |
| management. Many times, more than one type of | | | | certain that the investment opportunity matches |
| strategy will be used, based upon the type of | | | | your level of risk tolerance and that it is geared |
| investment that is being hedged. It's important to | | | | towards the types of investments that you |
| realize that no one strategy is better than | | | | understand. Be certain to have all of your |
| another - it's how the strategies are applied that | | | | questions answered before you make the final |
| will obtain the best results. | | | | decision, and choose the investment manager that |
| - Direct Hedge - just as the name implies, this | | | | has the best fit with your overall investment |
| links one type of asset with a similar asset that | | | | style. Understanding the intricacies of any hedge |
| can be expected to provide similar gains or losses. | | | | fund investment can't guarantee success, but it |
| Ideally, any movement up or down in price will be | | | | can help you to minimize any unnecessary risks |
| so closely matched as to eliminate risk. | | | | and ensure that you understand the true potential |
| - Dynamic Hedge - used when ongoing change is | | | | for positive returns in both the short term and |
| necessary to provide protection in other | | | | over time. |