There has been a great increase in the use of hedge funds in the personal financial portfolios of people in recent years. A hedge fund essentially is a type of investment partnership. In the case of this investment vehicle, a professional fund manager and various investors pool in their money into a certain fund. Scott Tominaga underlines that the name "hedge fund" is majorly derived from the use of trading techniques that various hedge fund managers are allowed to perform. These managers can typically "hedge" themselves by shorting stocks or going long, for the purpose of ensuring superior gains for the investors. Through hedge funds, people can typically maximize their money in a short period of time. The fund managers also tend to employ effective hedging strategies in order to reduce investment risks.
Hedge funds are popularly considered to be private investment vehicles that are focused on generating high returns for both high-net-worth individuals and institutional clients. This investment vehicle is considered to be one of the best higher return generating machines available. However, to ensure that the investors can enjoy high gains through hedge funds, it is imperative that people consult good financial advisers like Scott Tominaga who can formulate effective investment strategies. Tominaga has been working in the financial services industry for more than two decades now. His extensive involvement in the financial sphere makes him an ideal candidate to talk about various effective and efficient hedge fund strategies available.
The hedge funds strategy followed by a person should typically depend on their investment philosophy and career interest. Here are some of the popular hedge fund strategies that people can choose to follow:
• Long/Short Equity: This is one of the most common equity strategies followed by people today. In case of a long/short portfolio, the investors ideally purchase stocks of an enterprise that are expected to outperform, while also subsequently selling stocks that they think would underperform. These portfolios usually have low correlations to the financial market. A large number of people opt for a long/short portfolio as they usually generate absolute returns, regardless of the prevailing market performance.
• Market Neutral: Market neutral funds are largely similar to the equity long-short funds. Much like the long/short portfolio, the market natural funds are also independent of the performance of the financial market. These funds are largely aimed at eliminating or at least minimizing market volatility. Market neutral funds also use leverage in order to augment returns, while also making use of derivatives for the purpose of hedging the overall portfolio.
• Convertible Arbitrage: Buying convertibles and subsequently shorting their underlying stocks can prove to be quite an advantageous hedge fund strategy for investors. In case of this investment option, people typically buy the convertible debt of an enterprise and subsequently short-sell the stock of the same firm. The convertible debt basically is a type of a bond that can be converted to stock at any point of time in the future.
Scott Tominaga highlights that by following effective hedge fund strategies, the investors would be assured to enjoy superior gains.