Hedge Funds – How they work and why are they a craze?

With the increasing adoption of crypto currencies, hedge funds are on the radar of a cross-section of investors as they offer alternative and lucrative source of safer investments. A couple of decades ago, hedge funds had invariably rich people as their key investors. But with recent surge in crypto profits largely resulting due to surge in the Bitcoin price, we now have institutional investors, charitable endowments, government investment funds and pension funds as the big stake holders in hedge funds. With the advancements in cryptocurrency technology, lending platforms are gaining popularity. By investing in Initial Coin Offerings or ICOs, hedge fund investors have been able to save big by investing in the top hedge funds.

Diversified investment portfolio

Hedge funds are attracting more and more investors, including the forex traders and the seasoned crypto investors. Nowadays, we have the firms, known as seeders that dedicatedly work to identify the next generation star hedge fund managers and provide them the necessary support too. While some single strategy funds may put all their eggs in a single basket of high-yield bonds of technology stocks, there are some funds, known as “funds-of-funds” that receive billions of dollars from the investors for investing in diversified portfolios of underlying hedge funds.

Operating criteria for hedge funds

Hedge funds necessarily constitute private pool of funds collected from the investors that meet certain requirements. They are not subject to the limitations of retail mutual funds. They typically invest in derivative instruments and publicly listed companies. While some hedge funds combine long positions with short sales, “even-driven” ones identify certain corporate transactions. Those operating on “relative value” leverage the pricing discrepancies of the securities; the ones operating on the premise of “tactical trading” follow macro-economic trends of the markets. The very functioning of the hedge funds allows the investors discover unique trading opportunities every other day.

Best brokers to your help

Hedge funds charge performance fee and asset-based management fee, whose value is calculated as per the funds received by the investors. However, the strategies employed by the hedge funds may result in a cap on the amount that the fund may employ without adversely affecting the returns for the investors. They often conduct their investment activities through a prime broker, most often sourced from some Wall Street investment bank.

On shore and off shore funds

Hedge funds may target the markets where the investors are living, or offshore to a different location. Offshore hedge funds are open-ended, means they issue and redeem shares directly to the investors, based on the net asset value of the shares. However, the shares and units in mutual funds cannot be used for interim liquidity purposes. The investors need to keep them until liquidation or trading in the secondary transactions.

Target investors

As far as the United States of America is concerned, the key investors of hedge funds include private and public pension funds, high net worth investors and the university endowments. The growing interest of the people in hedge funds simply means that they need to re-structure themselves to make inroads into the Asian and other markets, including those of many European countries.

Alternative investment vehicle

Hedge funds have gained greater prominence in the recent years, thanks to the quick adoption of Bitcoin and other crypto currencies by the markets. Lending platforms such as the one offered by HedgeConnect that offer diversified investment options to the investors have become a lot popular as their fund managers ensure that your money is put into diversified portfolios to provide you a buffer and stability against the fluid market forces. Thee alternative investment vehicle provided by the hedge funds are key driver for the investors getting attracted to hedge funds.

Talk to the experts

Seasoned and experienced managers address the real issues when things occasionally go wrong. The innovative lending platform offered by HedgeConnect allows the investors to lend their money to the fund, either in crypto or in fiat currency, that the fund utilizes in purchasing ICO tokens and to invest in diversified portfolios. The end result is that you stand to have greater chance of gaining more, and steadily. Contact HedgeConnect.co to obtain best returns on your crypto investments.