The most common ins and outs you need to know about Hedge Mutual Funds
Before we take a deep dive into the world of Hedging and find out why multiple finance companies in India and over the world use hedging as one of their strategies for fund management, let us help you understand what it means to hedge.
Typically, hedges are used by gardeners as an alternative to traditional fences to mark a boundary, creating a barrier that highlights the limits, provides security and privacy. Similarly, Hedge fund managers use the hedging strategy to limit a funds exposure to market risks and achieve financial security.
What are hedge funds and how did they originate?
A hedge fund is an alternative investment fund that creates a common pool of money from multiple interested investors. The fund manager are typically institutional investors who use various unconventional investing strategies to avoid risks and make a profit.
These funds were started by fund management companies with the idea of being immune to the risks of market drawdowns and realizing a return on investment regardless of any turmoil in the market. Naturally, finance companies in India were drawn towards this strategy and started creating hedge fund services to exploit the hype.
How do they operate?
Hedge fund managers utilize various financial instruments and strategies to invest across an array of asset classes. They do this to diversify the risks associated with an
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