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  • Category: Investments

    What are hedge funds? Are hedge funds available in India?

    Have a query about hedge funds? Looking out for information about details of this fund? On this page find financial advice to your queries.

    Very recently I have come across a term called hedge fund. I have not fully understood the concept of hedge fund. So, I seek following information from the knowledgeable Members:-

    (a) What is hedge fund?
    (b) Is hege fund a category of mutual fund?
    (c) If yes, is it equity-oriented mutual fund or debt-oriented mutual fund?
    (d) How can I invest in hedge fund(s) in India?
    (e) Name some good hedge funds operating in India?

    Kindly furnish point-wise replies to the above questions.
  • Answers

    4 Answers found.
  • Hedge Funds are basically a investment partnership.Investors in hedge funds are known as limited partners. The money contributed by the limited partners are manged by general partner according to fund strategy.Main objective of hedge funds are same as others funds objective to minimize risk and maximize returns.Hedge funds are mainly like the mutual funds.The main goal of hedge funds is getting high return whether market is high or low.In hedge funds the money is invested in different shares like as in mutual fund.Hedge funds are category of mutual funds. Hedge funds are both equity-oriented mutual fund and debt-oriented mutual fund.In India you can invest in hedge funds by hedge funds managers.Many companies and banks in India provides hedge funds. They appoint hedge fund managers to decide where to invest.They will charge basically 2 percentage of fees and twenty percentage of total profit earned by investing.

  • Hedge funds are generally similar to other mutual fund investment scheme's. This also deals with buying and selling stocks. In this like other mutual fund shares you cannot sell when the price is high. In hedge funds there is a lockup period for selling. In mutual fund managers are paid according to their performance where as in hedge funds the managers are paid according to the percentage of returns that the investor earns. Some of the hedge fund are differentiated in Convertible Arbitrage, Emerging Markets, Equity Long Short, Fixed Income, Fund of Funds, Options Strategy, Statistical Arbitrage, and Macro. But investing in these funds we get higher returns.

  • Hedge funds are not the cup of tea of ordinary investors. The minimum investment required is Rs 1 crore.

    Now coming to the query pointwise -
    (a) Hedge funds are in the category of AIF (Alternative Investment Fund) which may have some similiarities with mutual funds but they differ from mutual funds in one way that is that in addition to equities they invest in all other types of products possible in the financial markets like taking long and short positions in equity market, trading of bonds, arbitrage opportunities, currencies, commodity derivative markets, fixed income products etc.
    As the name implies the objective of hedge fund is to maximise return for the investor by adopting alternative investment routes and in the process hedge the fund from market uncertainities.

    (b) It is not exactly categorised under mutual fund. It is a separate entity called hedge funds. Hedge funds are not regulated by govt as sternly as mutual fund.

    (c) It is neither equity nor debt fund.

    (d) The detailed information on how to invest in these funds can be seen in the fund prospectus of a particular company.

    (e) Some funds are - Singlar India Opportunities Trust, Motilal Oswal's offshore hedge fund, India Zen Fund, Munoth Hedge Fund, Forefront Alternative Investment Trust, Quant First Alternative Investment Trust and IIFL Opportunities Fund.

    Knowledge is power.

  • As the name suggests hedge funds are for reducing the risk in investments and maximising the returns.
    They are in the nature of mutual funds but not exactly like that as these are investing in all type of market securities and instruments.
    Basically these funds are for institutions and high networth individuals (HNI).
    These are popular in many countries but are not established in India. Though some funds are looking up in our country.

    Thoughts exchanged is knowledge gained.

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