Hedge Funds, an Asset Class Insight

Like the Absolute Return funds previously featured, Hedge funds can utilise numerous sophisticated investment strategies, which can make them a useful tool to consider when constructing a portfolio; correlations with traditional asset classes can often be low or even negative. This leads to the potential for gains to be made by high quality hedge fund managers when traditional financial assets might be facing difficult times.

However, because of the complexity of this asset class, many investors – and many financial advisers – may avoid this sector, due to unfamiliarity. We feel this need not be the case as this asset class can provide useful benefits to a portfolio. Hedge fund strategies include:

• Long/short strategies

Buying (going long on) securities predicted to increase in value whilst selling (going short on) securities predicted to either decrease in value or un