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Brisbane Web Hosting By Ingenuity |
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Australian Financial Services Licensee No. 220791 |
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Alternative investment portfolios, or hedge funds, are the next generation of professionally managed funds transforming the world's managed investment markets. They have been embraced by investors worldwide and are now recognised as an asset class in their own right. |
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Hedge funds operate by taking a "hedged" position against a particular event or expectation (whether an increase or decrease in value), effectively reducing risk. Not all hedge funds are the same; their risk profiles may differ greatly. A few will speculate in the hope of achieving spectacular returns, while the majority seek to manage risk prudently, avoiding speculative positions to deliver acceptable returns to investors. Hedge funds vary dramatically in terms of investment strategy, risk and absolute return, however they can be categorised by investment style. Before committing to any investment strategy, investors should understand a manager's investment style, targeted investment markets, securities and use of debt. It can be argued that the inclusion of an actively managed hedged investment strategy into a typical portfolio of stocks and bonds can reduce risk while delivering similar or increased overall returns. This has been demonstrated by an extensive evaluation of "hedged" and "non-hedged" investments by the major US advisory firm, Van Hedge Advisers. These studies have shown how hedge funds can significantly reduce risk in portfolios (where risk is measured in terms of Standard Deviation), as illustrated in the following diagram.
The Effect of Adding Hedge Funds to Traditional Portfolios
Hedge funds in Australia are quite new, particularly those which are "hedge funds" in the true sense of the word i.e. they are not leveraged and do not take outright speculative positions a la George Soros, but rather they use hedging mechanisms against a portfolio of shares. A number of new funds are "in the pipeline" and many will become an integral part of portfolios in the future. |
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Direct Investment Services Pty Ltd - ACN 063 878 437 Phone: (07) 3010 9408 Fax: (07) 3010 9811 |