Reasons for growth of hedge funds, Financial Management

Reasons for Growth of Hedge Funds

Many Hedge Fund strategies have the ability to generate positive returns in both rising and falling equity and bond markets. Inclusion of Hedge Funds in a balanced portfolio reduces overall portfolio risk and volatility, and increases returns. Huge variety of Hedge Fund investment styles - many uncorrelated with each other - provide investors with a wide choice of Hedge Fund strategies to meet their investment objectives. Various researches prove that Hedge Funds have higher returns and lower overall risk than traditional investment Funds. Hedge Funds provide an ideal long-term investment solution, eliminating the need to enter and exit the markets repeatedly. Adding to these, having Hedge Funds in an investment portfolio provides diversification not otherwise possible in traditional investing. Beyond investor demands, there are other factors also that drive the growth of Hedge Fund industry; they include:

Low Barriers to Entry: Apart from a few regulatory requirements and relatively low start-up costs, the barriers to entry are insignificant.

Attractive Compensations System: The compensation structure common to Hedge Funds attracts and retains investment professionals. As in a limited partnership, a typical fee arrangement for Hedge Funds is 1 to 3 percent of the capital committed plus 15 to 25 percent incentive for the above average performance, which is more than the fees charged for most traditional active equity products.

Intellectual Freedom: Investment professionals are attracted by the freedom to manage assets without any constraints that clients impose. This combination of reward and freedom is attracting many managers to become part of the growing Hedge Fund industry.

Improved Industry Infrastructure: Meanwhile, the infrastructure for Hedge Funds has become more robust in the form of improved Fund administration, auditing, prime brokerage, and the development of investible benchmarks. These facilitated managers to form new Hedge Funds as well as provide healthy returns, to investors who adopt Hedge Funds.

 

Posted Date: 9/11/2012 2:05:49 AM | Location : United States







Related Discussions:- Reasons for growth of hedge funds, Assignment Help, Ask Question on Reasons for growth of hedge funds, Get Answer, Expert's Help, Reasons for growth of hedge funds Discussions

Write discussion on Reasons for growth of hedge funds
Your posts are moderated
Related Questions
Q. Diffrence between present values of future cash ? The difference among the present values of future cash inflows generated by an asset and its cost is known as net present v

Breaks in Specific Cost of Capital: The specific costs of capital may also be affected by the amount of finance the firm wants to raise. As the amount of financing increases, the

Analytical procedures of auditors Auditors must apply analytical procedures at the planning and overall review stage of audit. Analytical procedures include the considerati

Using an appropriate 'factor model', assess (a) the performance of the management in creating value for shareholders and (b) the extent of the foreign exchange exposure of a FTSE10

the stock of akpan ltd performs well during recessionary periods, and the stock of okon ltd does well during growth periods. both stocks are currently selling for Rs 100 per share

Question 1 Describe the functions of merchant banking and functions of financial intermediaries Question 2 What do you understand by book building and Green shoe option

What are "free cash flows?" Free cash flows signify the total cash flows from business operations that are available to be distributed to the suppliers of a firm's capital each

What is Cost of Capital Cost of Capital is the rate which should be earned in order to satisfy required rate of return of the firm's investors. It may also be defined as the ra

What are the factors of debt securities A legal agreement, known as a trust deed, is drawn between security holders and company issuing the debt securities. Every security issu

What is Financial index & commodity index? Method of index uses in calculation? Weighted average method? How to calculate index?