Hedge funds offer numerous numbers of advantages and benefits, that’s the main reason the hedge fund market is growing very fast around the world and becoming popular day by day. Though it is not regulated by the market regulators, still it is well accepted by the high net worth investors and financial institutions that seek for higher return and can take higher risk. The advantages of hedge funds are
Hedge funds aim to generate higher absolute return and their target is set more than the average market return. They normally generate returns in millions to increase investors’ wealth.
The short selling and complex derivatives strategies enable the hedge funds to provide positive return during the both bull and bear market which attracts the investors.
Hedge funds can be used for diversification purpose as they invest in commodities and other distresses securities which help the investor to diversify the overall risk. Hedge funds always have lower correlation with the conventional equity markets as they invest in so many other things.
Very high number of hedge funds available in the market based on their trading strategies and risk-return objectives. So the investors can chose the most suitable one based on their own risk-return objective.
Investors willing to take higher risk to gain higher return often prefer the hedge funds because of its aggressive investment strategy and high risk-return target.
The hedge funds are run by the most efficient and experienced professionals which increases the confidence among the investors.
Hedge fund managers normally get paid based on the fund’s performance while their base pay is very less. This keeps the base fee for the investors very low at the time of poor performance unlike the mutual funds.