This may be at the expense of gains in a rising market. Targeted strategies - A fund may target less volatile returns, so it loses less in a down market.To decide if investing in hedge funds is right for you, consider the following: Pros This can make it harder to know where the fund invests your money, and what the risks are. For example, it may invest in multiple hedge funds, across assets and markets. The underlying fund may be offshore, with less monitoring.Ī fund of hedge funds may have extra risks. When a fund invests in another hedge fund, the underlying fund is usually not open to retail investors. It may invest all or some money in other hedge funds. The manager's expertise is crucial to the fund's success.Ī 'fund of hedge funds' is a fund that invests in other hedge funds. Active management - The fund manager decides what to invest in, and how much.Alternative investments - Investing in assets such as high yield bonds, synthetic assets, derivatives, unlisted shares or other hedge funds.And hopes to profit from the difference between buy and sell prices. The investor aims to buy an identical security at a lower price and return it to the lender.

Short selling - An investor borrows a security from another party (a broker), then sells it on the market.Enables an investor to buy or sell an asset in the future, based on an agreed price. And gain or reduce exposure to assets, markets or events. Derivatives - Securities whose value depends on an underlying asset such as a share, commodity or index.Leverage can increase returns, and increase losses. Leverage - When a fund increases its exposure to certain assets or strategies, usually through borrowing.See the fund's product disclosure statement (PDS). The features and risks of each depend on: There are different types of hedge funds. Or achieve a benchmark return with less volatility. It could try to outperform a benchmark, such as a market index or interest rate. This can make it a good way to diversify a portfolio.Ī hedge fund may aim to deliver positive or less volatile returns, in both rising and falling markets. Hedge fund returns may depend less on traditional assets, like shares and bonds. This may include the use of derivatives, alternative investments or leverage in domestic and international markets. Hedge funds ('absolute return' funds) use pooled funds to invest in alternative assets or strategies. Read the product disclosure statement and consider getting financial advice before you invest. Many aim for positive or less volatile returns, in both rising and falling markets.Ī hedge fund is a complex investment and risks vary. Hedge funds use investment strategies that are more complex than other managed funds.

Hedge fund investing