Better Investing

Alternative investments and hedge funds – demystified

Alternative investments include all investments other than bonds and equities, however, it is the more sophisticated alternative investment strategies developed by hedge funds that we are going to discuss. Hedging is a term widely used in finance, that refers to the process of reducing or eliminating a financial risk. The name “hedge fund” came about to indicate that these funds used various techniques to hedge market risks and enhance returns. In this context, most of the “hedging” used by hedge funds is undertaken with the goal of eliminating market risk, which is of course the risk that your investment portfolio will suffer if the broader market (e.g. share market) declines...

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